INCY filing — read by section

Item 2. Management’s Discussion and Analysis

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 
 The following discussion of our financial condition and results of operations as of and for the three and nine months ended September 30, 2021 should be read in conjunction with the unaudited condensed consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements as of and for the year ended December 31, 2020 included in our Annual Report on Form 10-K for the year ended December 31, 2020 previously filed with the SEC. 
 Forward-Looking Statements 
 This report contains forward-looking statements that involve risks and uncertainties. These statements relate to future periods, future events or our future operating or financial plans or performance. Often, these statements include the words “believe,” “expect,” “target,” “anticipate,” “intend,” “plan,” “seek,” “estimate,” “potential,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” or “may,” or the negative of these terms, and other similar expressions. These forward-looking statements include statements as to: 
 ● the discovery, development, formulation, manufacturing and commercialization of our compounds, our drug candidates and JAKAFI ® /JAKAVI ® (ruxolitinib), PEMAZYRE ® (pemigatinib), ICLUSIG ® (ponatinib), MONJUVI ® (tafasitamab-cxix) /MINJUVI ® ( tafasitamab), and OPZELURA™ (ruxolitinib) cream ; 

 ● our plans to further develop our operations outside of the United States; 

 
 ● conducting clinical trials internally, with collaborators, or with clinical research organizations; 

 ● our collaboration and strategic relationship strategy, and anticipated benefits and disadvantages of entering into collaboration agreements; 

 ● our licensing, investment and commercialization strategies, including our plans to commercialize our drug products and drug candidates; 

 ● the regulatory approval process, including obtaining U.S. Food and Drug Administration and other international health authorities’ approval for our products in the United States and abroad; 

 ● the safety, effectiveness and potential benefits and indications of our drug candidates and other compounds under development; 

 ● the timing and size of our clinical trials; the compounds expected to enter clinical trials; timing of clinical trial results; 

 ● our ability to manage expansion of our drug discovery and development operations; 

 ● future required expertise relating to clinical trials, manufacturing, sales and marketing; 

 ● obtaining and terminating licenses to products, drug candidates or technology, or other intellectual property rights; 

 ● the receipt from or payments pursuant to collaboration or license agreements resulting from milestones or royalties; 

 ● plans to develop and commercialize products on our own; 

 ● plans to use third-party manufacturers; 

 ● plans for our manufacturing operations; 

 
 ● expected expenses and expenditure levels; expected uses of cash; expected revenues and sources of revenues, including milestone payments; expectations with respect to inventory; 

 ● expectations with respect to reimbursement for our products; 

 ● the expected impact of recent accounting pronouncements and changes in tax laws; 

 
 ● expected losses; fluctuation of losses; currency translation impact associated with collaboration royalties; 

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 ● our profitability; the adequacy of our capital resources to continue operations; 

 ● the need to raise additional capital; 

 ● the costs associated with resolving matters in litigation and governmental proceedings; 

 ● our expectations regarding competition; 

 ● expectations relating to the anticipated completion dates for our Delaware headquarters expansion project and our large molecule production facility; 

 ● our investments, including anticipated expenditures, losses and expenses; 

 ● our patent prosecution and maintenance efforts; and 

 ● the potential effects of the COVID-19 pandemic and efforts undertaken or to be undertaken by us or applicable governmental authorities on local and global economic conditions, and on our business, results of operations and financial condition. 

 
 These forward-looking statements reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties. These risks and uncertainties could cause actual results to differ materially from those projected and include, but are not limited to: 
 ● our ability to successfully commercialize our drug products and drug candidates; 

 
 ● our ability to maintain at anticipated levels reimbursement for our products from government health administration authorities, private health insurers and other organizations; 

 ● our ability to establish and maintain effective sales, marketing and distribution capabilities; 

 ● the risk of reliance on other parties to manufacture our products, which could result in a short supply of our products, increased costs, and withdrawal of regulatory approval; 

 ● our ability to maintain regulatory approvals to market our products; 

 ● our ability to achieve a significant market share in order to achieve or maintain profitability; 

 ● the risk of civil or criminal penalties if we market our products in a manner that violates health care fraud and abuse and other applicable laws, rules and regulations; 

 
 ● our ability to discover, develop, formulate, manufacture and commercialize our drug candidates; 

 ● the risk of unanticipated delays in, or discontinuations of, research and development efforts; 

 ● the risk that previous preclinical testing or clinical trial results are not necessarily indicative of future clinical trial results; 

 ● risks relating to the conduct of our clinical trials; 

 ● changing regulatory requirements; 

 ● the risk of adverse safety findings; 

 ● the risk that results of our clinical trials do not support submission of a marketing approval application for our drug candidates; 

 ● the risk of significant delays or costs in obtaining regulatory approvals; 

 ● risks relating to our reliance on third-party manufacturers, collaborators, and clinical research organizations; 

 ● risks relating to the development of new products and their use by us and our current and potential collaborators; 

 ● risks relating to our inability to control the development of out-licensed compounds or drug candidates; 

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 ● risks relating to our collaborators’ ability to develop and commercialize JAKAVI, OLUMIANT, TABRECTA and the drug candidates licensed from us; 

 ● costs associated with prosecuting, maintaining, defending and enforcing patent claims and other intellectual property rights; 

 ● our ability to maintain or obtain adequate product liability and other insurance coverage; 

 ● the risk that our drug candidates may not obtain or maintain regulatory approval; 

 ● the impact of technological advances and competition, including potential generic competition; 

 ● our ability to compete against third parties with greater resources than ours; 

 ● risks relating to changes in pricing and reimbursement in the markets in which we may compete; 

 ● risks relating to governmental healthcare reform efforts, including efforts to control, set or cap pricing for our commercial drugs in the U.S and abroad; 

 ● competition to develop and commercialize similar drug products; 

 ● our ability to obtain and maintain patent protection and freedom to operate for our discoveries and to continue to be effective in expanding our patent coverage; 

 ● the impact of changing laws on our patent portfolio; 

 ● developments in and expenses relating to litigation; 

 ● our ability to in-license drug candidates or other technology; 

 ● unanticipated construction, other delays or changes in plans relating to our Delaware headquarters expansion project and our large molecule production facility; 

 ● our ability to integrate successfully acquired businesses, development programs or technology; 

 ● our ability to obtain additional capital when needed; 

 ● fluctuations in net cash provided and used by operating, financing and investing activities; 

 ● our ability to analyze the effects of new accounting pronouncements and apply new accounting rules; 

 ● risks relating to our ability to sustain profitability; 

 ● risks related to public health pandemics such as the COVID-19 pandemic; and 

 ● the risks set forth under “Risk Factors.” 

 
 Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by federal securities laws, we undertake no obligation to update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. 
 In this report all references to “Incyte,” “we,” “us,” “our” or the “Company” mean Incyte Corporation and our subsidiaries, except where it is made clear that the term means only the parent company. 
 Incyte, JAKAFI and PEMAZYRE are our registered trademarks and OPZELURA is our trademark. We also refer to trademarks of other corporations and organizations in this Quarterly Report on Form 10-Q. 
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 Summary Risk Factors 
 Our business is subject to numerous risks and uncertainties that could affect our ability to successfully implement our business strategy and affect our financial results. You should carefully consider all of the information in this report and, in particular, the following principal risks and all of the other specific factors described in Item 1A. of this report, “Risk Factors,” before deciding whether to invest in our company.
 ● We depend heavily on JAKAFI/JAKAVI (ruxolitinib), and if we are not able to maintain revenues from JAKAFI/JAKAVI or those revenues decrease, our business may be materially harmed. 

 ● If we or our collaborators are unable to obtain, or maintain at anticipated levels, reimbursement for JAKAFI/JAKAVI or our other products from government and other third-party payors, our results of operations and financial condition could be harmed. 

 ● A limited number of specialty pharmacies and wholesalers represent a significant portion of revenues from JAKAFI, and the loss of, or significant reduction in sales to, any one of these specialty pharmacies or wholesalers could harm our operations and financial condition. 

 ● If we are unable to establish and maintain effective sales, marketing and distribution capabilities, or to enter into agreements with third parties to do so, we will not be able to successfully commercialize our products. 

 ● If we fail to comply with applicable laws and regulations, we could lose our approval to market our products or be subject to other governmental enforcement activity. 

 ● If the use of our products harms or is perceived to harm patients, our regulatory approvals could be revoked or otherwise negatively impacted or we could be subject to costly product liability claims. 

 ● If we market our products in a manner that violates various laws and regulations, we may be subject to civil or criminal penalties. 

 ● Competition for our products, in particular JAKAFI/JAKAVI, could harm our business and result in a decrease in our revenue. 

 ● The COVID-19 pandemic and measures to address the pandemic have adversely affected and can in the future adversely affect our business and results of operations. 

 ● We or our collaborators may be unsuccessful in discovering and developing drug candidates, and we may spend significant time and money attempting to do so, in particular with our later stage drug candidates. 

 ● If we or our collaborators are unable to obtain regulatory approval in and outside of the United States for drug candidates, we and our collaborators will be unable to commercialize those drug candidates. 

 ● Health care reform measures could impact the pricing and profitability of pharmaceuticals, and adversely affect the commercial viability of our or our collaborators’ products and drug candidates. 

 ● Conflicts between us and our collaborators or termination of our collaboration agreements could limit future development and commercialization of our drug candidates and harm our business. 

 ● If we are unable to establish collaborations to fully exploit our drug discovery and development capabilities or if future collaborations are unsuccessful, our future revenue prospects could be diminished. 

 ● If we fail to enter into additional in-licensing agreements or if these arrangements are unsuccessful, we may be unable to increase our number of successfully marketed products and our revenues. 

 ● Even if one of our drug candidates receives regulatory approval, we may determine that commercialization would not be worth the investment. 

 ● Any approved drug product that we bring to the market may not gain market acceptance by physicians, patients, healthcare payors and others in the medical community. 

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 ● We have limited capacity to conduct preclinical testing and clinical trials, and our resulting dependence on other parties could result in delays in and additional costs for our drug development efforts. 

 ● We face significant competition for our drug discovery and development efforts, and if we do not compete effectively, our commercial opportunities will be reduced or eliminated. 

 ● Our reliance on others to manufacture our drug products and drug candidates could result in drug supply constraints, delays in clinical trials, increased costs, and withdrawal or denial of regulatory approvals. 

 ● If we fail to comply with the extensive legal and regulatory requirements affecting the health care industry, we could face increased costs, penalties and a loss of business. 

 ● The illegal distribution and sale by third parties of counterfeit or unfit versions of our or our collaborators’ products or stolen products could harm our business and reputation. 

 ● As most of our drug discovery and development operations are conducted at our headquarters in Wilmington, Delaware, the loss of access to this facility would negatively impact our business. 

 ● If we lose any of our key employees or are unable to attract and retain additional personnel, our business and ability to achieve our objectives could be harmed. 

 ● If we fail to manage our growth effectively, our ability to develop and commercialize products could suffer. 

 ● We may acquire businesses or assets, form joint ventures or make investments in other companies that may be unsuccessful, divert our management’s attention and harm our operating results and prospects. 

 ● Risks associated with our operations outside of the United States could adversely affect our business. 

 ● If product liability lawsuits are brought against us, we could face substantial liabilities and may be required to limit commercialization of our products, and our results of operations could be harmed. 

 ● Because our activities involve the use of hazardous materials, we may be subject to claims relating to improper handling, storage or disposal of these materials that could be time consuming and costly. 

 ● We expect to continue to incur significant expenses to discover and develop drugs, which could result in future losses and impair our achievement of and ability to sustain profitability in the future. 

 ● If we are unable to raise additional capital in the future when we require it, our efforts to broaden our product portfolio or commercialization efforts could be limited. 

 ● Our marketable securities and long term investments are subject to risks that could adversely affect our overall financial position, and tax law changes could adversely affect our results of operations and financial condition. 

 ● If we are unable to achieve milestones, develop product candidates to license or renew or enter into new collaborations, our royalty and milestone revenues and future prospects for those revenues may decrease. 

 ● Any arbitration or litigation involving us and regarding intellectual property infringement claims could be costly and disrupt our drug discovery and development efforts. 

 ● Our inability to adequately protect or enforce our proprietary information may result in loss of revenues or otherwise reduce our ability to compete. 

 ● If the effective term of our patents is decreased or if we need to refile some of our patent applications, the value of our patent portfolio and the revenues we derive from it may be decreased. 

 ● International patent protection is particularly uncertain and costly, and our involvement in opposition proceedings may result in the expenditure of substantial sums and management resources. 

 ● Significant disruptions of information technology systems, breaches of data security, or unauthorized disclosures of sensitive data could harm our business and subject us to liability or reputational damage. 

 ● Increasing use of social media could give rise to liability, breaches of data security, or reputational damage, which could harm our business and results of operations. 

 

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 Overview 
 Incyte is a biopharmaceutical company focused on the discovery, development and commercialization of proprietary therapeutics. Our global headquarters is located in Wilmington, Delaware, where we conduct global clinical development and commercial operations. We also conduct commercial and clinical development operations from our European headquarters in Morges, Switzerland and our Japanese office in Tokyo.
 As described in more detail below, we operate in two therapeutic areas that are defined by the indications of our approved medicines and the diseases for which our clinical candidates are being developed. One therapeutic area is Hematology/Oncology, which is comprised of Myeloproliferative Neoplasms (MPNs) and Graft-Versus-Host Disease (GVHD), as well as solid tumors and hematologic malignancies. The other therapeutic area is Inflammation and Autoimmunity (IAI), which includes our newly established Dermatology commercial franchise. We are also eligible to receive milestones and royalties on molecules discovered by us and licensed to third parties. 
 Hematology and Oncology 
 Our hematology and oncology franchise is comprised of four approved products, which are JAKAFI (ruxolitinib), MONJUVI (tafasitamab-cxix)/MINJUVI (tafasitamab), PEMAZYRE (pemigatinib) and ICLUSIG (ponatinib), as well as numerous clinical development programs. 
 JAKAFI (ruxolitinib) 
 JAKAFI (ruxolitinib) is our first product to be approved for sale in the United States. It was approved by the U.S. Food and Drug Administration (FDA) in November 2011 for the treatment of adults with intermediate or high-risk myelofibrosis (MF), in December 2014 for the treatment of adults with polycythemia vera (PV) who have had an inadequate response to or are intolerant of hydroxyurea, in May 2019 for the treatment of steroid-refractory acute graft-versus-host disease (GVHD) in adult and pediatric patients 12 years and older and in September 2021 for the treatment of chronic GVHD after failure of one or two lines of systemic therapy in adult and pediatric patients 12 years and older . Myelofibrosis and polycythemia vera are both myeloproliferative neoplasms (MPNs), a type of rare blood cancer, and GVHD is an adverse immune response to an allogeneic hematopoietic stem cell transplant (HSCT). Under our collaboration agreement with our collaboration partner Novartis Pharmaceutical International Ltd., Novartis received exclusive development and commercialization rights to ruxolitinib outside of the United States for all hematologic and oncologic indications and sells ruxolitinib outside of the United States under the name JAKAVI.
 In 2003, we initiated a research and development program to explore the inhibition of enzymes called janus associated kinases (JAK). The JAK family is composed of four tyrosine kinases—JAK1, JAK2, JAK3 and Tyk2—that are involved in the signaling of a number of cytokines and growth factors. JAKs are central to a number of biologic processes, including the formation and development of blood cells and the regulation of immune functions. Dysregulation of the JAK-STAT signaling pathway has been associated with a number of diseases, including myeloproliferative neoplasms, other hematological malignancies, rheumatoid arthritis and other chronic inflammatory diseases. 
 We have discovered multiple potent, selective and orally bioavailable JAK inhibitors that are selective for JAK1 or JAK1 and JAK2. JAKAFI is the most advanced compound in our JAK program. It is an oral JAK1 and JAK2 inhibitor.
 JAKAFI is marketed in the United States through our own specialty sales force and commercial team. JAKAFI was the first FDA-approved JAK inhibitor for any indication and was the first FDA-approved product in all three of its current indications. JAKAFI remains the first-line standard of care in MF and remains the only FDA-approved product for PV and steroid-refractory acute GVHD. The FDA has granted JAKAFI orphan drug status for MF, PV and GVHD.
 JAKAFI is distributed primarily through a network of specialty pharmacy providers and wholesalers that allow for efficient delivery of the medication by mail directly to patients or direct delivery to the patient’s pharmacy. Our distribution process uses a model that is well-established and familiar to physicians who practice within the oncology field.

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 To further support appropriate use and future development of JAKAFI, our U.S. Medical Affairs department is responsible for providing appropriate scientific and medical education and information to physicians, preparing scientific presentations and publications, and overseeing the process for supporting investigator sponsored trials.
 Myelofibrosis. MF is a rare, life-threatening condition. MF, considered the most serious of the myeloproliferative neoplasms, can occur either as primary MF, or as secondary MF that develops in some patients who previously had polycythemia vera or essential thrombocythemia. We estimate there are between 16,000 and 18,500 patients with MF in the United States. Based on the modern prognostic scoring systems referred to as International Prognostic Scoring System and Dynamic International Prognostic Scoring System, we believe intermediate and high-risk patients represent 80% to 90% of all patients with MF in the United States and encompass patients over the age of 65, or patients who have or have ever had any of the following: anemia, constitutional symptoms, elevated white blood cell or blast counts, or platelet counts less than 100,000 per microliter of blood.
 Most MF patients have enlarged spleens and many suffer from debilitating symptoms, including abdominal discomfort, pruritus (itching), night sweats and cachexia (involuntary weight loss). There were no FDA approved therapies for MF until the approval of JAKAFI. 
 The FDA approval was based on results from two randomized Phase III trials (COMFORT-I and COMFORT-II), which demonstrated that patients treated with JAKAFI experienced significant reductions in splenomegaly (enlarged spleen). COMFORT-I also demonstrated improvements in symptoms. The most common hematologic adverse reactions in both trials were thrombocytopenia and anemia. These events rarely led to discontinuation of JAKAFI treatment. The most common non-hematologic adverse reactions were bruising, dizziness and headache.
 In August 2014, the FDA approved supplemental labeling for JAKAFI to include Kaplan-Meier overall survival curves as well as additional safety and dosing information. The overall survival information is based on three-year data from COMFORT-I and II, and shows that at three years the probability of survival for patients treated with JAKAFI in COMFORT-I was 70% and for those patients originally randomized to placebo it was 61%. In COMFORT-II, at three years the probability of survival for patients treated with JAKAFI was 79% and for patients originally randomized to best available therapy it was 59%. In December 2016, we announced an exploratory pooled analysis of data from the five-year follow-up of the COMFORT-I and COMFORT-II trials of patients treated with JAKAFI, which further supported previously published overall survival findings.
 In September 2016, we announced that JAKAFI had been included as a recommended treatment in the latest National Comprehensive Cancer Network (NCCN) Clinical Practice Guidelines in Oncology for myelofibrosis, underscoring the important and long-term clinical benefits seen in patients treated with JAKAFI.
 In October 2017, the FDA approved updated labeling for JAKAFI to include the addition of new patient-reported outcome (PRO) data from the COMFORT-I study, as well as updating the warning related to progressive multifocal leukoencephalopathy. An exploratory analysis of PRO data of patients with myelofibrosis receiving JAKAFI showed improvement in fatigue-related symptoms at Week 24. Fatigue response (defined as a reduction of 4.5 points or more from baseline in the PROMIS ® Fatigue total score) was reported in 35% of patients treated with JAKAFI versus 14% of the patients treated with placebo.
 Polycythemia Vera. PV is a myeloproliferative neoplasm typically characterized by elevated hematocrit, the volume percentage of red blood cells in whole blood, which can lead to a thickening of the blood and an increased risk of blood clots, as well as an elevated white blood cell and platelet count. When phlebotomy can no longer control PV, chemotherapy such as hydroxyurea, or interferon, is utilized. Approximately 25,000 patients with PV in the United States are considered uncontrolled because they have an inadequate response to or are intolerant of hydroxyurea, the most commonly used chemotherapeutic agent for the treatment of PV.
 In December 2014, the FDA approved JAKAFI for the treatment of patients with PV who have had an inadequate response to or are intolerant of hydroxyurea. The approval of JAKAFI for PV was based on data from the pivotal Phase III RESPONSE trial. In this trial, patients treated with JAKAFI demonstrated superior hematocrit control and reductions in spleen volume compared to best available therapy. In addition, a greater proportion of patients treated with JAKAFI 

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 achieved complete hematologic remission—which was defined as achieving hematocrit control, and lowering platelet and white blood cell counts. In the RESPONSE trial, the most common hematologic adverse reactions (incidence > 20%) were thrombocytopenia and anemia. The most common non-hematologic adverse events (incidence >10%) were headache, abdominal pain, diarrhea, dizziness, fatigue, pruritus, dyspnea and muscle spasms.
 In March 2016, the FDA approved supplemental labeling for JAKAFI to include additional safety data as well as efficacy analyses from the RESPONSE trial to assess the durability of response in JAKAFI treated patients after 80 weeks. At this time, 83% patients were still on treatment, and 76% of the responders at 32 weeks maintained their response through 80 weeks.
 In June 2016, we announced data from the Phase III RESPONSE-2 study of JAKAFI in patients with inadequately controlled PV that was resistant to or intolerant of hydroxyurea who did not have an enlarged spleen. These data showed that JAKAFI was superior to best available therapy in maintaining hematocrit control (62.2% vs. 18.7%, respectively; P<0.0001) without the need for phlebotomy.
 In August 2017, we announced that JAKAFI had been included as a recommended treatment in the latest NCCN Guidelines for patients with polycythemia vera who have had an inadequate response to first-line therapies, such as hydroxyurea.
 Graft-versus-host disease. GVHD is a condition that can occur after an allogeneic HSCT (the transfer of genetically dissimilar stem cells or tissue). In GVHD, the donated bone marrow or peripheral blood stem cells view the recipient’s body as foreign and attack various tissues. 12-month survival rates in patients with Grade III or IV steroid-refractory acute GVHD are 50% or less, and the incidence of steroid-refractory acute and chronic GVHD is approximately 3,000 per year in the United States.
 In June 2016, we announced that the FDA granted Breakthrough Therapy designation for ruxolitinib in patients with acute GVHD. In May 2019, the FDA approved JAKAFI for the treatment of steroid-refractory acute GVHD in adult and pediatric patients 12 years and older. The approval was based on data from REACH1, an open-label, single-arm, multicenter study of JAKAFI in combination with corticosteroids in patients with steroid-refractory grade II-IV acute GVHD. The overall response rate (ORR) in patients refractory to steroids alone was 57% with a complete response (CR) rate of 31%. The most frequently reported adverse reactions among all study participants were infections (55%) and edema (51%), and the most common laboratory abnormalities were anemia (75%), thrombocytopenia (75%) and neutropenia (58%).
 In September 2021, the FDA approved JAKAFI for the treatment of chronic GVHD after failure of one or two lines of systemic therapy in adult and pediatric patients 12 years and older. This approval was based on data from REACH3, a Phase III, randomized, open-label, multicenter study of JAKAFI in comparison to best available therapy for treatment of steroid-refractory chronic GVHD after allogeneic stem cell transplantation. The overall response rate through Cycle 7 Day 1 was 70% for Jakafi compared to 57% for best available therapy. The most common hematologic adverse reactions (incidence > 35%) were anemia and thrombocytopenia. The most common nonhematologic adverse reactions (incidence ≥ 20%) were infections (pathogen not specified) and viral infection. In addition, the FDA updated labeling for JAKAFI to include warnings of increased risk of major adverse cardiovascular events, thrombosis, and secondary malignancies related to another JAK-inhibitor treating rheumatoid arthritis, a condition for which Jakafi is not indicated. In patients with MF and PV treated with Jakafi in clinical trials, the rates of thromboembolic events were similar in Jakafi and control treated patients. 
 We have retained all development and commercialization rights to JAKAFI in the United States and are eligible to receive development and sales milestones as well as royalties from product sales outside the United States. We hold patents that cover the composition of matter and use of ruxolitinib, which patents, including applicable extensions, expire in late 2027.

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 MONJUVI (tafasitamab-cxix) / MINJUVI (tafasitamab) 
 In January 2020, we and MorphoSys AG entered into a collaboration and license agreement to further develop and commercialize MorphoSys' proprietary anti-CD19 antibody tafasitamab (MOR208) globally. The agreement became effective March 2020. Tafasitamab is an Fc-engineered antibody against CD19 currently in clinical development for the treatment of B cell malignancies. We have rights to co-commercialize tafasitamab in the United States with MorphoSys, and we have exclusive development and commercialization rights outside of the United States. 
 In July 2020, we and MorphoSys announced that the FDA approved MONJUVI (tafasitamab-cxix), which is indicated in combination with lenalidomide for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL) not otherwise specified, including DLBCL arising from low grade lymphoma, and who are not eligible for autologous stem cell transplant (ASCT). MONJUVI was approved under accelerated approval based on overall response rate. The approval of MONJUVI was based on data from the MorphoSys-sponsored Phase II L-MIND study, an open label, multicenter, single arm trial of MONJUVI in combination with lenalidomide as a treatment for adult patients with r/r DLBCL. Results from the study showed an objective response rate (ORR) of 55% (39 out of 71 patients; primary endpoint) and a complete response (CR) rate of 37% (26 out of 71 patients). The median duration of response (mDOR) was 21.7 months. The most frequent serious adverse reactions were infections (26%), including pneumonia (7%) and febrile neutropenia (6%). Updated three-year data from L-MIND were presented at the American Society of Clinical Oncology (ASCO) 2021.
 In August 2020, we and MorphoSys announced that MONJUVI in combination with lenalidomide had been included in the latest National Comprehensive Cancer Network (NCCN) Clinical Practice Guidelines in Oncology for B-cell Lymphomas. 
 In August 2021, we and MorphoSys announced that the European Commission (EC) granted conditional marketing authorization for MINJUVI (tafasitamab) in combination with lenalidomide, followed by MINJUVI monotherapy, for the treatment of adult patients with relapsed or refractory DLBCL who are not eligible for autologous stem cell transplant (ASCT). The conditional approval is based on the three-year results from the L-MIND study evaluating the safety and efficacy of MINJUVI in combination with lenalidomide as a treatment for patients with r/r DLBCL who are not eligible for ASCT. The results showed best objective response rate (ORR) of 56.8% (primary endpoint), including a complete response (CR) rate of 39.5% and a partial response rate (PR) of 17.3%, as assessed by an independent review committee. The median duration of response (mDOR) was 43.9 months after a minimum follow up of 35 months (secondary endpoint). MINJUVI together with lenalidomide was shown to provide a clinically meaningful response and the side effects were manageable. Warnings and precautions for MINJUVI include infusion-related reactions, myelosuppression, including neutropenia and thrombocytopenia, infections and tumour lysis syndrome.
 DLBCL is the most common type of non-Hodgkin lymphoma in adults worldwide, comprising 40% of all cases. DLBCL is characterized by rapidly growing masses of malignant B-cells in the lymph nodes, spleen, liver, bone marrow or other organs. It is an aggressive disease with ~40% of patients not responding to initial therapy or relapsing thereafter. We estimate that there are ~10,000 patients diagnosed in the United States each year with r/r DLBCL who are not eligible for ASCT. In the EU, we estimate there are ~14,000 patients diagnosed each year with r/r DLBCL who are not eligible for ASCT.
 PEMAZYRE (pemigatinib) 
 PEMAZYRE is the first internally discovered product to be internationally commercialized by us.
 In April 2020, we announced that the FDA approved PEMAZYRE (pemigatinib), a selective fibroblast growth factor receptor (FGFR) kinase inhibitor, for the treatment of adults with previously treated, unresectable locally advanced or metastatic cholangiocarcinoma with an FGFR2 fusion or other rearrangement as detected by an FDA-approved test. PEMAZYRE is the first FDA-approved treatment for this indication, which was approved under accelerated approval based on overall response rate and duration of response (DOR). 

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 In March 2021, PEMAZYRE was approved by the Japanese Ministry of Health, Labour and Welfare (MHLW) for the treatment of patients with unresectable biliary tract cancer (BTC) with an FGFR2 fusion gene, worsening after cancer chemotherapy. Also in March 2021, PEMAZYRE was approved by the European Commission (EC) for the treatment of adults with locally advanced or metastatic cholangiocarcinoma with an FGFR2 fusion or rearrangement that have progressed after at least one prior line of systemic therapy. 
 In July 2021, the UK’s National Institute for Health and Care Excellence (NICE) recommended PEMAZYRE for patients with cholangiocarcinoma with a fibroblast growth factor receptor 2 (FGFR2) fusion or rearrangement that have progressed after at least one prior line of systemic therapy. NICE’s guidance enables all eligible patients in England and Wales to have access to PEMAZYRE through the National Health Service (NHS).
 Cholangiocarcinoma is a rare cancer that arises from the cells within the bile ducts. It is often diagnosed late (stages III and IV) and the prognosis is poor. The incidence of cholangiocarcinoma with FGFR2 fusions or rearrangements is increasing, and it is currently estimated that there are 2,000-3,000 patients in the United States, Europe and Japan.
 The approval of PEMAZYRE was based on data from FIGHT-202, a multi-center, open-label, single-arm study evaluating PEMAZYRE as a treatment for adults with cholangiocarcinoma. In FIGHT-202, and in patients harboring FGFR2 fusions or rearrangements (Cohort A), PEMAZYRE monotherapy resulted in an overall response rate of 36% (primary endpoint), and median DOR of 9.1 months (secondary endpoint). FIGHT-302, a Phase III trial of pemigatinib for the first-line treatment of patients with cholangiocarcinoma and FGFR2 fusions or rearrangements, is ongoing. 
 We have retained all rights to PEMAZYRE globally, other than those granted to Innovent Biologics, Inc. to develop and commercialize pemigatinib in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan. 
 ICLUSIG (ponatinib) 
 In June 2016, we acquired the European operations of ARIAD Pharmaceuticals, Inc. and obtained an exclusive license to develop and commercialize ICLUSIG (ponatinib) in Europe and other select countries. ICLUSIG is a kinase inhibitor. The primary target for ICLUSIG is BCR-ABL, an abnormal tyrosine kinase that is expressed in chronic myeloid leukemia (CML) and Philadelphia-chromosome positive acute lymphoblastic leukemia (Ph+ ALL).
 In the European Union, ICLUSIG is approved for the treatment of adult patients with chronic phase, accelerated phase or blast phase CML who are resistant to dasatinib or nilotinib; who are intolerant to dasatinib or nilotinib and for whom subsequent treatment with imatinib is not clinically appropriate; or who have the T315I mutation, or the treatment of adult patients with Ph+ ALL who are resistant to dasatinib; who are intolerant to dasatinib and for whom subsequent treatment with imatinib is not clinically appropriate; or who have the T315I mutation. 
 Clinical Programs in Hematology and Oncology 
 Ruxolitinib and itacitinib 
 As part of our ongoing LIMBER (Leadership In MPNs BEyond Ruxolitinib) clinical development initiative, which is designed to improve and expand therapeutic options for patients with myeloproliferative neoplasms, we are evaluating combinations of ruxolitinib with other therapeutic modalities, as well as developing a once-a-day formulation of ruxolitinib for potential use as monotherapy and combination therapy. Bioavailability and bioequivalence data were published for ruxolitinib’s once-daily (QD) extended release (XR) formulation at the European Hematology Association (EHA) 2021 Virtual Congress in June 2021.

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 Based on positive Phase II data, we opened two pivotal trials of ruxolitinib in combination with parsaclisib (PI3Kδ) in first-line MF (LIMBER-313) and in MF patients with a suboptimal response to ruxolitinib monotherapy (LIMBER-304), and both trials are ongoing. Additional Phase II trials combining ruxolitinib with investigational agents from our portfolio such as INCB57643 (BET) and INCB00928 (ALK2) in patients with MF are in preparation, and additional discovery and development initiatives are also ongoing within the LIMBER program, which are evaluating both internally-discovered compounds, including itacitinib (JAK1), and candidates from collaboration partners. 
 Itacitinib is a selective JAK1 inhibitor being evaluated in GRAVITAS-309, a pivotal Phase III trial of itacitinib in patients with steroid-naïve chronic GVHD. The FDA has granted itacitinib orphan drug status for GVHD.
 In September 2021, we and Syndax Pharmaceuticals, Inc. announced an exclusive worldwide collaboration and license agreement to develop and commercialize axatilimab, Syndax’s anti-CSF-1R monoclonal antibody, pending regulatory clearance. Together, we plan to develop axatilimab as a therapy for patients with chronic GVHD as well as in additional immune-mediated diseases where CSF-1R-dependent monocytes and macrophages are believed to contribute to organ fibrosis. The global pivotal Phase II AGAVE-201 trial of axatilimab monotherapy in patients with chronic GVHD in the third line setting is ongoing. Additional trials of axatilimab are planned in patients with chronic GVHD, including a Phase II trial in combination with a JAK inhibitor in patients with steroid-refractory cGVHD. 
 Tafasitamab 
 Tafasitamab is an anti-CD19 antibody and is being investigated as a therapeutic option in B cell malignancies in a number of ongoing and planned combination trials. An open-label Phase II combination trial (L-MIND) is investigating the safety and efficacy of tafasitamab in combination with lenalidomide in patients with relapsed or refractory diffuse large B-cell lymphoma (r/r DLBCL), and the ongoing Phase III B-MIND trial is assessing the combination of tafasitamab and bendamustine versus rituximab and bendamustine in r/r DLBCL. firstMIND is a Phase Ib safety trial of tafasitamab as a first-line therapy for patients with DLBCL, and frontMIND, a placebo-controlled Phase III trial evaluating tafasitamab in combination with lenalidomide added to rituximab plus chemotherapy (R-CHOP) as a first-line therapy for patients with DLBCL, is ongoing. 
 A placebo-controlled Phase III trial (inMIND) of tafasitamab added to lenalidomide plus rituximab (R 2 ) in patients with relapsed or refractory follicular or marginal zone lymphomas is ongoing, and we are preparing to initiate a proof-of-concept study (topMIND) of tafasitamab in combination with parsaclisib (PI3Kδ) in patients with relapsed or refractory B-cell malignancies, a proof-of-concept study (coreMIND) of tafasitamab in combination with parsaclisib in chronic lymphocytic leukemia (CLL) and a proof-of-concept study of tafasitamab, lenalidomide and plamotamab in patients with r/r DLBCL. 
 In January 2021, the FDA granted orphan drug designation to tafasitamab as a treatment for patients with follicular lymphoma.
 Pemigatinib 
 Pemigatinib is a potent and selective inhibitor of the fibroblast growth factor receptor (FGFR) isoforms 1, 2 and 3 with demonstrated activity in preclinical studies. The FGFR family of receptor tyrosine kinases can act as oncogenic drivers in a number of liquid and solid tumor types. 
 We initiated the FIGHT clinical program to evaluate pemigatinib across a spectrum of cancers that are driven by FGF/FGFR alterations. The program initially included three Phase II trials – FIGHT-201 in patients with bladder cancer, FIGHT-202 in patients with cholangiocarcinoma, and FIGHT-203 in patients with myeloid/lymphoid neoplasms with FGFR1 rearrangement. Based on data generated from these ongoing trials, we have initiated additional trials. FIGHT-207, a solid tumor-agnostic trial evaluating pemigatinib in patients with driver-alterations of FGF/FGFR, is now closed to recruitment. Based on findings from this study, we have identified populations that may potentially benefit from treatment with pemigatinib and intend to initiate Phase II studies in glioblastoma and non-small cell lung cancer.

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 Pemigatinib has Breakthrough Therapy designation as a treatment for patients with myeloid/lymphoid neoplasms (MLN) with FGFR1 rearrangement who have relapsed or are refractory to initial chemotherapy. 
 Parsaclisib 
 The PI3Kδ pathway mediates oncogenic signaling in B cell malignancies. Parsaclisib is a PI3Kδ inhibitor that has demonstrated potency and selectivity in preclinical studies and has potential therapeutic utility in the treatment of patients with lymphoma. We initiated the CITADEL clinical program to evaluate parsaclisib in non-Hodgkin lymphomas, and we are currently running Phase II trials in follicular lymphoma, marginal zone lymphoma and mantle cell lymphoma and Phase III trials in those indications are in preparation. The FDA has granted orphan drug designation and Fast Track designation to parsaclisib as a treatment for patients with follicular lymphoma, marginal zone lymphoma and mantle cell lymphoma.
 In December 2020, we announced preliminary results from the ongoing CITADEL monotherapy development program, which was designed to enable registration of parsaclisib. Results from four cohorts were presented at the American Society of Hematology (ASH), including in r/r follicular lymphoma (CITADEL-203), in BTK-naïve r/r marginal zone lymphoma (CITADEL-204) and in both BTK-naïve and BTK-experienced r/r mantle cell lymphoma (CITADEL-205). 
 In October 2021, we announced the FDA acceptance of a NDA seeking approval of parsaclisib for the treatment of patients with relapsed or refractory follicular lymphoma, marginal zone lymphoma and mantle cell lymphoma. The submission is based on data from several Phase 2 studies (CITADEL-203, -204 and -205) evaluating parsaclisib as a treatment for relapsed or refractory NHLs (follicular, marginal zone and mantle cell). 
 A Phase II trial of parsaclisib in patients with autoimmune hemolytic anemia (AIHA), a rare red blood cell disorder, is ongoing. In June 2021, Phase II data evaluating parsaclisib in AIHA were presented at EHA. The majority of patients achieved a response with parsaclisib over the initial 12-week treatment period. Treatment with parsaclisib was generally well tolerated. Based on these results, we expect to initiate a Phase III trial in warm AIHA. The FDA has granted orphan drug designation to parsaclisib as a treatment for patients with AIHA.
 Retifanlimab 
 In October 2017, we and MacroGenics, Inc. announced an exclusive global collaboration and license agreement for MacroGenics’ retifanlimab (formerly INCMGA0012), an investigational monoclonal antibody that inhibits PD-1. Under this collaboration, we obtained exclusive worldwide rights for the development and commercialization of retifanlimab in all indications. The molecule is currently being evaluated both as monotherapy and in combination therapy across various tumor types. Potentially registration-enabling trials in microsatellite instability-high (MSI-H) endometrial cancer and Merkel cell carcinoma are ongoing.
 The Phase III POD1UM-303 trial of retifanlimab in combination with platinum-based chemotherapy as a first-line treatment for patients with SCAC is underway. In July 2021, we announced that the FDA issued a complete response letter (CRL) for the BLA of retifanlimab for the treatment of squamous cell carcinoma of the anal canal (SCAC). In October 2021, we announced that we withdrew the Marketing Authorization Application (MAA) seeking approval of retifanlimab in SCAC. 
 The Phase III POD1UM-304 trial is evaluating retifanlimab in combination with platinum-based chemotherapy as a first-line treatment for patients with non-small cell lung cancer (NSCLC), and in October 2020, our collaboration partner Zai Lab announced dosing of the first patient in China. 
 Retifanlimab has been granted Fast Track designation for the treatment of certain patients with advanced or metastatic MSI-H or DNA mismatch repair (dMMR) endometrial cancer, for the treatment of certain patients with locally advanced or metastatic SCAC and for the treatment of Merkel cell carcinoma (MCC). The FDA and EMA have granted orphan drug designation to retifanlimab as a treatment for patients with locally advanced or metastatic SCAC and the FDA has granted orphan drug designation to retifanlimab as a treatment for patients with MCC.

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 Indication and status 
 
 Once-a-day ruxolitinib (JAK1/JAK2) 
 Myelofibrosis, polycythemia vera and GVHD: clinical pharmacology studies 
 
 ruxolitinib + parsaclisib 
 (JAK1/JAK2 + PI3Kδ) 
 Myelofibrosis: Phase III (first-line therapy) (LIMBER-313)
Myelofibrosis: Phase III (suboptimal responders to ruxolitinib) (LIMBER-304) 
 
 ruxolitinib + INCB57643 
 (JAK1/JAK2 + BET) 
 Myelofibrosis: Phase II in preparation 
 
 ruxolitinib + INCB00928 
 (JAK1/JAK2 + ALK2) 
 Myelofibrosis: Phase II in preparation 
 
 ruxolitinib + CK0804 1 
 (JAK1/JAK2 + CB-Tregs) 
 Myelofibrosis: PoC in preparation 
 
 itacitinib (JAK1) 
 Treatment-naïve chronic GVHD: Phase III (GRAVITAS-309) 
 
 axatilimab (anti-CSF-1R) 2 
 Chronic GVHD: Phase II (third-line therapy) (AGAVE-201) 
 
 tafasitamab 
(CD19) 3 
 r/r DLBCL: Phase II (L-MIND); Phase III (B-MIND) 
 1L DLBCL: Phase Ib (firstMIND); Phase III (frontMIND) 
 r/r follicular & marginal zone lymphomas: Phase III (inMIND) 
 r/r chronic lymphocytic leukemia: Phase II (coreMIND) in preparation 
 r/r B-cell malignancies: PoC with parsaclisib (PI3Kδ) (topMIND) 
 r/r B-cell malignancies: PoC with lenalidomide and plamotamab in preparation 4 
 ​ 
 
 pemigatinib
(FGFR1/2/3) 
 CCA: Phase III (FIGHT-302) 
 Myeloid/lymphoid neoplasms (MLN): Phase II (FIGHT-203) 
 Tumor agnostic: Phase II (FIGHT-207) 
 Glioblastoma: Phase II in preparation 
 NSCLC: Phase II in preparation 
 ​ 
 
 parsaclisib 
(PI3Kδ) 
 r/r follicular lymphoma: Phase II (CITADEL-203) 
 r/r marginal zone lymphoma: Phase II (CITADEL-204) 
 r/r mantle cell lymphoma: Phase II (CITADEL-205) 
 r/r follicular and marginal zone lymphoma: Phase III (CITADEL-302) in preparation 
 1L mantle cell lymphoma: Phase III (CITADEL-310) in preparation 
 Autoimmune hemolytic anemia: Phase II; Phase III in preparation 
 ​ 
 
 retifanlimab 
(PD-1) 5 
 SCAC: Phase II (POD1UM-202); Phase III (PODIUM-303) 
 MSI-high endometrial cancer: Phase II (POD1UM-101, POD1UM-204) 
 Merkel cell carcinoma: Phase II (POD1UM-201) 
 NSCLC: Phase III (POD1UM-304) 
 

 1. Development collaboration with Cellenkos, Inc.
 2. axatilimab development in collaboration with Syndax, pending regulatory clearance.
 3. tafasitamab development in collaboration with MorphoSys.
 4. Clinical collaboration with MorphoSys and Xencor, Inc. to investigate the combination of tafasitamab plus lenalidomide in combination with Xencor’s CD20xCD3 XmAb bispecific antibody, plamotamab.
 5. retifanlimab licensed from MacroGenics.
 Earlier-Stage Development Programs in Hematology and Oncology 
 We also have a number of other earlier-stage clinical programs in hematology and oncology, as detailed in the table below. We intend to describe these programs more fully if we obtain clinical proof-of-concept and establish that a program warrants further development in a specific indication or group of indications. 
 

 

 ​ 

 

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 Modality 
 Candidates 
 
 Small molecules 
 INCB81776 (AXL/MER), epacadostat (IDO1), INCB86550 (PD-L1), INCB99280 (PD-L1), INCB99318 (PD-L1), INCB106385 (A2A/A 2B ) 
 ​ 
 
 Monoclonal antibodies 1 
 INCAGN1876 (GITR), INCAGN2385 (LAG-3), INCAGN1949 (OX40), INCAGN2390 (TIM-3), INCA00186 (CD73) 
 ​ 
 
 Bispecific antibodies 
 MCLA-145 (PD-L1xCD137) 2 
 ​ 
 

 1. Discovery collaboration with Agenus Inc.
 2. MCLA-145 development in collaboration with Merus N.V.
 Inflammation and AutoImmunity (IAI) 
 We recently established Incyte Dermatology as a new commercial franchise, which launched its first approved product, OPZELURA (ruxolitinib) cream, in October 2021, following FDA approval in September 2021. 
 Incyte’s IAI efforts also include numerous clinical development programs. 
 OPZELURA (ruxolitinib) cream 
 In September 2021, we announced that the FDA approved OPZELURA (ruxolitinib) cream, a novel cream formulation of Incyte’s selective JAK1/JAK2 inhibitor ruxolitinib, for the topical short-term and non-continuous chronic treatment of mild to moderate atopic dermatitis (AD) in non-immunocompromised patients 12 years of age and older whose disease is not adequately controlled with topical prescription therapies, or when those therapies are not advisable.
 AD is a skin disorder that causes long term inflammation of the skin resulting in itchy, red, swollen and cracked skin. Onset can occur at any age, but is more common in infants and children. In the United States, we estimate that there are approximately 10 million diagnosed adolescent and adult patients with AD.
 The approval of OPZELURA was based on data from two randomized, double-blind, vehicle-controlled Phase III studies (TRuE-AD1 and TRuE-AD 2) evaluating the safety and efficacy of OPZELURA in adolescents and adults with mild to moderate AD. Significantly more patients treated with OPZELURA achieved Investigator’s Global Assessment (IGA) Treatment Success at Week 8 (defined as an IGA score of 0 or 1 with at least a 2-point improvement from baseline, the primary endpoint: 53.8% in TRuE-AD1 and 51.3% in TRuE-AD2, compared to vehicle (15.1% in TRuE-AD1, 7.6% in TRuE-AD2; P<0.0001). Significantly more patients treated with OPZELURA experienced a clinically meaningful reduction in itch from baseline at Week 8, as measured by a ≥4-point reduction in the itch Numerical Rating Scale (itch NRS4): 52.2% in TRuE-AD1 and 50.7% in TRuE-AD2, compared to vehicle (15.4% in TRuE-AD1, 16.3% in TRuE-AD2; P<0.0001), among patients with an NRS score of at least 4 at baseline. The most common (≥1%) treatment-emergent adverse reactions in patients treated with OPZELURA were nasopharyngitis, diarrhea, bronchitis, ear infection, eosinophil count increased, urticaria, folliculitis, tonsillitis and rhinorrhea.
 Clinical Programs in Dermatology 
 Ruxolitinib cream is a potent, selective inhibitor of JAK1 and JAK2 that provides the opportunity to directly target diverse pathogenic pathways that underlie certain dermatologic conditions, including atopic dermatitis and vitiligo. 
 We are currently evaluating ruxolitinib cream in a Phase III trial, TRuE-AD3, in pediatric atopic dermatitis patients ages ≥2 years to < 12 years.
 In May 2021, we announced positive topline results from the Phase III TRuE-V program evaluating ruxolitinib cream as a treatment for adolescent and adult patients with vitiligo. Both TRuE-V1 and TRuE-V2 studies met the primary 

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 and key secondary endpoints, including patient reported outcomes. The overall efficacy and safety profile of ruxolitinib cream was consistent with previously reported Phase II data, and no new safety signals were observed. 
 In October 2021, data from the Week 24 analysis of the Phase III TRuE-V program were presented at the European Academy of Dermatology and Venereology Congress (EADV). Treatment with 1.5% ruxolitinib cream twice daily (BID) resulted in greater improvement versus vehicle for the primary and all key secondary endpoints in both the TRuE-V1 and TRuE-V2 studies. Results, which were consistent across both studies, showed that 29.9% of patients applying ruxolitinib cream achieved ≥75% improvement from baseline in the facial Vitiligo Area Scoring Index (F-VASI75), the primary endpoint. The overall safety profile of ruxolitinib cream in vitiligo was consistent with previous study data. In the TRuE-V studies, patients using ruxolitinib cream did not report clinically significant application site reactions. Treatment-emergent adverse events were consistent with previous studies, with no serious treatment-related adverse events reported. 
 In October 2021, we announced the validation of the European Marketing Authorization Application (MAA) for ruxolitinib cream as a potential treatment for adolescents and adults (age >12 years) with non-segmental vitiligo with facial involvement. 
 Vitiligo is a long-term skin condition characterized by patches of the skin losing their pigment. It is estimated that vitiligo affects 0.5-2% of the US population and, therefore, there are at least 1.5 million patients in the United States with this disorder. There are no FDA approved treatments for repigmentation of vitiligo lesions.
 We are also developing INCB54707, which is an oral small molecule selective JAK1 inhibitor. INCB54707 is undergoing evaluation in patients with hidradenitis suppurativa (HS), a chronic skin condition where lesions develop as a result of inflammation and infection of the sweat glands. In October 2020, initial results from the clinical program were presented and a randomized Phase IIb trial of INCB54707 is underway in patients with HS. In March 2021, we initiated a Phase II trial evaluating INCB54707 in patients with vitiligo. A Phase II trial evaluating INCB54707 in patients with prurigo nodularis is ongoing.
 Clinical Programs in Other IAI 
 A Phase II trial of INCB00928 is in preparation for patients with fibrodysplasia ossificans progressiva (FOP), a disorder in which muscle tissue and connective tissue are gradually replaced by bone. The FDA has granted Fast Track designation and orphan drug designation to INCB00928 as a treatment for patients with FOP.
 ​ 
 

 

 
 
 Indication and status 
 
 ruxolitinib cream 1 
 (JAK1/JAK2) 
 Atopic dermatitis: Phase III pediatric study ongoing (TRuE-AD3) 
 Vitiligo: Phase III (TRuE-V1, TRuE-V2; primary endpoint met in both studies); sNDA and MAA in progress 
 ​ 
 
 INCB54707 (JAK1) 
 Hidradenitis suppurativa: Phase II 
 Vitiligo: Phase II 
 Prurigo nodularis: Phase II 
 ​ 
 
 INCB00928 (ALK2) 
 Fibrodysplasia ossificans progressiva: Phase II in preparation 
 

 ​ 
 1. Novartis’ rights for ruxolitinib outside of the United States under our Collaboration and License Agreement with Novartis do not include topical administration.
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 Collaborative Partnered Programs 
 As described below under “—License Agreements and Business Relationships,” we are eligible for milestone payments and royalties on certain products that we licensed to third parties. These include OLUMIANT (baricitinib), which is licensed to our collaborative partner Eli Lilly and Company, and JAKAVI (ruxolitinib) and TABRECTA (capmatinib), which are licensed to Novartis. 
 Baricitinib 
 ​ 
 We have a second JAK1 and JAK2 inhibitor, baricitinib, which is subject to our collaboration agreement with Lilly, in which Lilly received exclusive worldwide development and commercialization rights to the compound for inflammatory and autoimmune diseases. 
 ​ 
 Rheumatoid Arthritis. Rheumatoid arthritis is an autoimmune disease characterized by aberrant or abnormal immune mechanisms that lead to joint inflammation and swelling and, in some patients, the progressive destruction of joints. Rheumatoid arthritis can also affect connective tissue in the skin and organs of the body.
 Current rheumatoid arthritis treatments include the use of non-steroidal anti-inflammatory drugs, disease-modifying anti-rheumatic drugs, such as methotrexate, and the newer biological response modifiers that target pro-inflammatory cytokines, such as tumor necrosis factor, implicated in the pathogenesis of rheumatoid arthritis. None of these approaches to treatment is curative; therefore, there remains an unmet need for new safe and effective treatment options for these patients. Rheumatoid arthritis is estimated to affect about 1% of the world’s population.
 The Phase III program of baricitinib in patients with rheumatoid arthritis incorporated all three rheumatoid arthritis populations (methotrexate naïve, biologic naïve, and tumor necrosis factor (TNF) inhibitor inadequate responders); used event rates to fully power the baricitinib program for structural comparison and non-inferiority vs. adalimumab; and evaluated patient-reported outcomes. All four Phase III trials met their respective primary endpoints.
 ​ 
 In January 2016, Lilly submitted an NDA to the FDA and an MAA to the EMA for baricitinib as treatment for rheumatoid arthritis. In February 2017, we and Lilly announced that the European Commission approved baricitinib as OLUMIANT for the treatment of moderate-to-severe rheumatoid arthritis in adult patients who have responded inadequately to, or who are intolerant to, one or more disease-modifying antirheumatic drugs (DMARDs). In July 2017, the Japanese Ministry of Health, Labour and Welfare (MHLW) granted marketing approval for OLUMIANT for the treatment of rheumatoid arthritis (including the prevention of structural injury of joints) in patients with inadequate response to standard-of-care therapies. In June 2018, the FDA approved the 2mg dose of OLUMIANT for the treatment of adults with moderately-to-severely active rheumatoid arthritis (RA) who have had an inadequate response to one or more tumor necrosis factor (TNF) inhibitor therapies.
 Atopic Dermatitis. Lilly has conducted a Phase IIa trial and a Phase III program to evaluate the safety and efficacy of baricitinib in patients with moderate-to-severe atopic dermatitis. The JAK-STAT pathway has been shown to play an essential role in the dysregulation of immune responses in atopic dermatitis. Therefore, we believe that inhibiting cytokine pathways dependent on JAK1 and JAK2 may lead to positive clinical outcomes in AD. 
 In February 2019, we and Lilly announced that baricitinib met the primary endpoint in BREEZE-AD1 and BREEZE-AD2, two Phase III studies evaluating the efficacy and safety of baricitinib monotherapy for the treatment of adult patients with moderate-to-severe AD and, in August 2019, we and Lilly announced that baricitinib met the primary endpoint in BREEZE-AD7, a Phase III study evaluating the efficacy and safety of baricitinib in combination with standard-of-care topical corticosteroids in patients with moderate-to-severe AD. In January 2020, we and Lilly announced that baricitinib met the primary endpoint in both BREEZE-AD4 and BREEZE-AD5, the results of which completed the placebo-controlled data program intended to support global registrations. An sNDA for baricitinib has been submitted by Lilly for the treatment of patients with moderate to severe AD. In April 2021, we and Lilly announced the FDA extended the review period for the sNDA for baricitinib for the treatment of moderate to severe AD by three months to allow time for additional data analyses. In July 2021, we and Lilly announced that the FDA will not meet the PDUFA action date for 

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 the sNDA for baricitinib for the treatment of adults with moderate to severe AD due to the FDA's ongoing assessment of JAK inhibitors.
 In January 2020, Lilly announced that baricitinib had been submitted for regulatory review in Europe as a treatment for patients with moderate-to-severe AD. In October 2020, Lilly announced that the European Commission approved baricitinib as OLUMIANT for the treatment of moderate-to-severe AD in adult patients who are candidates for systemic therapy. In December 2020, baricitinib was approved by the MHLW for the treatment of patients with moderate-to-severe AD.
 Systemic Lupus Erythematosus. Systemic lupus erythematosus (SLE) is a chronic disease that causes inflammation. In addition to affecting the skin and joints, it can affect other organs in the body such as the kidneys, the tissue lining the lungs and heart, and the brain. Lilly has conducted a Phase II trial to evaluate the safety and efficacy of baricitinib in patients with SLE. Baricitinib’s activity profile suggests that it inhibits cytokines implicated in SLE such as type I interferon (IFN), type II IFN-γ, IL-6, and IL-23 as well as other cytokines that may have a role in SLE, including granulocyte macrophage colony stimulating factor (GM-CSF) and IL-12. The potential impact of baricitinib on the IFN pathway is highly relevant to SLE, as clinical and preclinical studies have established that this pathway is involved in the pathogenesis of SLE. Lilly is currently running two Phase III trials of baricitinib in patients with SLE, BRAVE I and BRAVE II.
 Alopecia Areata . Alopecia areata is an autoimmune disorder in which the immune system attacks the hair follicles, causing hair loss in patches. In March 2020, Lilly announced that baricitinib received Breakthrough Therapy designation for the treatment of alopecia areata, based on the positive Phase II results of Lilly’s adaptive Phase II/III study BRAVE-AA1. In March 2021, we and Lilly announced positive results from BRAVE-AA2, the Phase III trial evaluating the efficacy and safety of once-daily baricitinib in adults with severe alopecia areata. In April 2021, we and Lilly announced positive results from the Phase III portion of BRAVE-AA1. In September 2021, we and Lilly announced detailed results from BRAVE-AA1 and BRAVE-AA2 at the European Academy of Dermatology and Venereology Congress (EADV). The two studies showed statistically significant improvement in scalp hair regrowth across both baricitinib dosing groups when compared to placebo. 
 Capmatinib 
 Capmatinib is a potent and highly selective MET inhibitor. The investigational compound has demonstrated inhibitory activity in cell-based biochemical and functional assays that measure MET signaling and MET dependent cell proliferation, survival and migration. Under our agreement, Novartis received worldwide exclusive development and commercialization rights to capmatinib and certain back-up compounds in all indications. Capmatinib is being evaluated in patients with hepatocellular carcinoma, non-small cell lung cancer and other solid tumors, and may have potential utility as a combination agent.
 MET is a clinically validated receptor kinase cancer target. Abnormal MET activation in cancer correlates with poor prognosis. Dysregulation of the MET pathway triggers tumor growth, formation of new blood vessels that supply the tumor with nutrients, and causes cancer to spread to other organs. Dysregulation of the MET pathway is seen in many types of cancers, including lung, kidney, liver, stomach, breast and brain.
 In May 2020, we and Novartis announced the FDA approval of capmatinib as TABRECTA for the treatment of adult patients with metastatic NSCLC whose tumors have a mutation that leads to MET exon 14 skipping (METex14) as detected by an FDA-approved test. TABRECTA is the first and only treatment approved to specifically target NSCLC with this driver mutation and is approved for first-line and previously treated patients regardless of prior treatment type. 
 The FDA approval of TABRECTA was based on results from the pivotal GEOMETRY mono-1 study. In the METex14 population (n=97), the confirmed overall response rate was 68% and 41% among treatment-naive (n=28) and previously treated patients (n=69), respectively, based on the Blinded Independent Review Committee (BIRC) assessment per RECIST v1.1. In patients taking TABRECTA, the study also demonstrated a median duration of response of 12.6 months in treatment-naive patients (19 responders) and 9.7 months in previously treated patients (28 responders). The most common treatment-related adverse events (AEs) (incidence ≥20%) are peripheral edema, nausea, fatigue, vomiting, 

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 dyspnea, and decreased appetite. In September 2020, we and Novartis announced that GEOMETRY mono-1 results were published in The New England Journal of Medicine.
 In June 2020, we and Novartis announced that the MHLW approved TABRECTA for METex14 mutation-positive advanced and/or recurrent unresectable NSCLC.
 NSCLC is the most common type of lung cancer, impacting more than 2 million people per year globally. Approximately 3-4 percent of all patients with NSCLC have tumors with a mutation that leads to MET exon 14 skipping. Though rare, this mutation is an indicator of especially poor prognosis and poor responses to standard therapies, including immunotherapy. 
 

 

 
 

 

 
 
 Indication and status 
 
 baricitinib (JAK1/JAK2) 1 
 Atopic dermatitis: Phase III (BREEZE-AD); approved in European Union and Japan; sNDA under review 
 Severe alopecia areata: Phase III (BRAVE-AA1, BRAVE-AA2) 
 Systemic lupus erythematosus: Phase III (BRAVE I, BRAVE II) 
 
 capmatinib (MET) 2 
 NSCLC (with MET exon 14 skipping mutations): approved in United States and Japan 
 ​ 
 

 1. baricitinib licensed to Lilly.
 2. capmatinib licensed to Novartis.
 License Agreements and Business Relationships 
 We establish business relationships, including collaborative arrangements with other companies and medical research institutions to assist in the clinical development and/or commercialization of certain of our drugs and drug candidates and to provide support for our research programs. We also evaluate opportunities for acquiring products or rights to products and technologies that are complementary to our business from other companies and medical research institutions.
 Below is a brief description of our significant business relationships and collaborations and related license agreements that expand our pipeline and provide us with certain rights to existing and potential new products and technologies. Additional information regarding our collaboration agreements, including their financial and accounting impact on our business and results of operations, can be found in Note 9 of notes to our condensed consolidated financial statements.
 Out-License Agreements 
 Novartis 
 In November 2009, we entered into a Collaboration and License Agreement with Novartis. Under the terms of the agreement, Novartis received exclusive development and commercialization rights outside of the United States to ruxolitinib and certain back up compounds for hematologic and oncology indications, including all hematological malignancies, solid tumors and myeloproliferative diseases. We retained exclusive development and commercialization rights to JAKAFI (ruxolitinib) in the United States and in certain other indications. Novartis also received worldwide exclusive development and commercialization rights to our MET inhibitor compound capmatinib and certain back up compounds in all indications. We retained options to co-develop and to co-promote capmatinib in the United States. In April 2016, we amended this agreement to provide that Novartis has exclusive research, development and commercialization rights outside of the United States to ruxolitinib (excluding topical formulations) in the GVHD field.
 Lilly 
 In December 2009, we entered into a License, Development and Commercialization Agreement with Lilly. Under the terms of the agreement, Lilly received exclusive worldwide development and commercialization rights to baricitinib 

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 and certain back up compounds for inflammatory and autoimmune diseases. In March 2016, we entered into an amendment to the agreement with Lilly that allows us to engage in the development and commercialization of ruxolitinib in the GVHD field. In May 2020, we amended our agreement with Lilly to enable Lilly to commercialize baricitinib for the treatment of COVID-19. 
 Innovent 
 In December 2018, we entered into a Research Collaboration and Licensing Agreement with Innovent Biologics, Inc. Under the terms of this agreement, Innovent received exclusive development and commercialization rights to pemigatinib and our clinical-stage product candidates itacitinib and parsaclisib in hematology and oncology indications in mainland China, Hong Kong, Macau and Taiwan. 
 Zai Lab 
 In July 2019, we entered into a Collaboration and License Agreement with a subsidiary of Zai Lab Limited. Under the terms of this agreement, Zai Lab’s subsidiary received development and exclusive commercialization rights to INCMGA0012 in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan. We retained an option to assist in the promotion of INCMGA0012 in Zai Lab’s licensed territories. 
 InnoCare 
 In August 2021, we entered into a Collaboration and License Agreement with a subsidiary of InnoCare Pharma Limited. Under the terms of this agreement, InnoCare’s subsidiary received development and exclusive commercialization rights to tafasitamab in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan.
 In-License Agreements 
 Agenus 
 In January 2015, we entered into a License, Development and Commercialization Agreement with Agenus Inc. and its wholly-owned subsidiary, 4-Antibody AG (now known as Agenus Switzerland Inc.), which we collectively refer to as Agenus. Under this agreement, the parties have agreed to collaborate on the discovery of novel immuno-therapeutics using Agenus’ antibody discovery platforms. Under the terms of this agreement, as amended in February 2017, we received exclusive worldwide development and commercialization rights to four checkpoint modulators directed against GITR, OX40, LAG-3 and TIM-3. In addition to the initial four program targets, we and Agenus have the option to jointly nominate and pursue additional targets within the framework of the collaboration, and in November 2015, three more targets were added, two of which were removed from the collaboration under the February 2017 amendments.
 Takeda (ARIAD) 
 In June 2016, we acquired from ARIAD Pharmaceuticals, Inc. all of the outstanding shares of ARIAD Pharmaceuticals (Luxembourg) S.à.r.l., the parent company of ARIAD’s European subsidiaries responsible for the development and commercialization of ICLUSIG in the European Union and other countries. We obtained an exclusive license to develop and commercialize ICLUSIG in Europe and other select countries. ARIAD was subsequently acquired by Takeda Pharmaceutical Company Limited in 2017. 
 Merus 
 In December 2016, we entered into a Collaboration and License Agreement with Merus N.V. Under this agreement, which became effective in January 2017, the parties have agreed to collaborate with respect to the research, discovery and development of bispecific antibodies utilizing Merus’ technology platform. The collaboration encompasses up to eleven independent programs. The most advanced collaboration program is MCLA-145, a bispecific antibody targeting PD-L1 and CD137, for which we received exclusive development and commercialization rights outside of the United States. Merus retained exclusive development and commercialization rights in the United States to MCLA-145. 

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 Calithera 
 In January 2017, we entered into a Collaboration and License Agreement with Calithera Biosciences, Inc. Under this agreement, we received an exclusive, worldwide license to develop and commercialize small molecule arginase inhibitors, including INCB01158 (CB-1158), which is currently in Phase II clinical trials, for multiple myeloma. 
 MacroGenics 
 In October 2017, we entered into a Global Collaboration and License Agreement with MacroGenics. Under this agreement, we received exclusive development and commercialization rights worldwide to MacroGenics’ INCMGA0012, an investigational monoclonal antibody that inhibits PD-1. MacroGenics has retained the right to develop and commercialize, at its cost and expense, its pipeline assets in combination with INCMGA0012. 
 Syros 
 In January 2018, we entered into a Target Discovery, Research Collaboration and Option Agreement with Syros Pharmaceuticals, Inc. Under this agreement, Syros will use its proprietary gene control platform to identify novel therapeutic targets with a focus in myeloproliferative neoplasms and we have received options to obtain exclusive worldwide rights to intellectual property resulting from the collaboration for up to seven validated targets. We will have exclusive worldwide rights to develop and commercialize any therapies under the collaboration that modulate those validated targets. 
 MorphoSys 
 In January 2020, we entered into a Collaboration and License Agreement with MorphoSys AG and MorphoSys US Inc., a wholly-owned subsidiary of MorphoSys AG, covering the worldwide development and commercialization of MOR208 (tafasitamab), an investigational Fc engineered monoclonal antibody directed against the target molecule CD19. Under the terms of this agreement, we received exclusive commercialization rights outside of the United States, and MorphoSys and we have co-commercialization rights in the United States, with respect to tafasitamab. 
 Syndax 
 In September 2021, we entered into a Collaboration and License Agreement with Syndax covering the worldwide development and commercialization of SNDX-6352 (axatilimab), Syndax’s anti-CSF-1R monoclonal antibody. Effectiveness of this agreement is subject to termination of the Hart-Scott-Rodino Antitrust Improvements Act waiting period. Under the terms of this agreement, we will receive exclusive commercialization rights outside of the United States, and Syndax will have co-commercialization rights in the United States with respect to axatilimab.
 COVID-19 
 In December 2019, coronavirus disease of 2019, or COVID-19, was first reported in Wuhan, China. In March 2020, the World Health Organization declared COVID-19 a pandemic (“the COVID-19 Pandemic”). We and our collaboration partners Lilly and Novartis initiated a number of clinical trials to address COVID-19.
 In April 2020, we announced the initiation of a Phase III clinical trial (RUXCOVID) to evaluate the efficacy and safety of ruxolitinib plus standard-of-care (SoC), compared to SoC therapy alone, in patients not on mechanical ventilation and who have COVID-19 associated cytokine storm. We sponsored this collaborative study in the United States and our collaboration partner Novartis International Pharmaceutical Ltd. sponsored the study outside of the United States. 
 In December 2020, we announced initial results from RUXCOVID, where treatment with ruxolitinib plus SoC did not prevent complications compared to SoC treatment alone in patients with COVID-19 associated cytokine storm. The RUXCOVID study has been completed and the data will be further analyzed to determine any potential impact on 

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 other studies of ruxolitinib in patients with COVID-19, including our Expanded Access Program in the United States, which allows eligible patients with severe COVID-19 associated cytokine storm to receive ruxolitinib. 
 In March 2021, results from a second Phase III clinical trial to evaluate the efficacy and safety of ruxolitinib plus SoC, compared to SoC therapy alone, in COVID-19 patients on mechanical ventilation and who have acute respiratory distress syndrome (ARDS), a type of respiratory failure characterized by rapid onset of widespread inflammation in the lungs were announced. Ruxolitinib failed to reduce mortality due to any cause through Day 29 although in the U.S. study population (91% of total study patients), there was a clinically and statistically significant improvement in mortality in each of the 5mg and 15mg ruxolitinib arms. 
 In April 2020, Lilly announced that it has entered into an agreement with the National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health, to study baricitinib as an arm in NIAID's Adaptive COVID-19 Treatment Trial (ACTT-2). The study is investigating the efficacy and safety of baricitinib as a potential treatment for hospitalized patients diagnosed with COVID-19 in the United States, and Lilly is also planning an expansion to include Europe and Asia. 
 In September 2020, we and Lilly announced initial results from ACTT-2, where baricitinib in combination with remdesivir reduced the time to recovery in comparison with remdesivir alone. Additional data announced in October 2020 showed that baricitinib plus remdesivir resulted in a numerical decrease in mortality through Day 29 compared to remdesivir alone, with a more pronounced reduction seen in more severely ill patients.
 In November 2020, we and Lilly announced that the FDA issued an Emergency Use Authorization (EUA) for the distribution and emergency use of baricitinib to be used in combination with remdesivir in hospitalized adult and pediatric patients two years of age or older with suspected or laboratory confirmed COVID-19 who require supplemental oxygen, invasive mechanical ventilation, or extracorporeal membrane oxygenation. In December 2020, we and Lilly announced that data from ACTT-2 supportive of the EUA were published in the New England Journal of Medicine. In July 2021, we and Lilly announced that the FDA broadened the EUA for baricitinib to allow for treatment with or without remdesivir. The EUA now provides for the use of baricitinib for treatment of COVID-19 in hospitalized adults and pediatric patients two years of age or older requiring supplemental oxygen, non-invasive or invasive mechanical ventilation or extracorporeal membrane oxygenation (ECMO).
 In April 2021, we and Lilly announced that the primary endpoint was not met in COV-BARRIER, the Phase III randomized, double-blind, placebo–controlled study to evaluate the efficacy and safety of baricitinib in hospitalized adults not on mechanical ventilation and who have COVID-19. There was, however, a 38% reduction in mortality by Day 28 in patients treated with baricitinib in addition to SoC. In August 2021, we and Lilly announced new data from an additional cohort of 101 adult patients from the COV-BARRIER trial. In this sub-study, patients with COVID-19 on mechanical ventilation or extracorporeal membrane oxygenation (ECMO) who received baricitinib plus standard of care were 46% less likely to die by Day 28 compared to patients who received placebo plus standard of care.
 Critical Accounting Policies and Significant Estimates 
 The preparation of financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates under different assumptions or conditions. We believe the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of our condensed consolidated financial statements. See Note 2 of Notes to the Condensed Consolidated Financial Statements for a complete list of our significant accounting policies.
 Revenue Recognition. We recognize revenue only when we have satisfied a performance obligation through transferring control of the promised good or service to a customer in an amount that reflects the consideration we expect to receive in exchange for those goods or services. We apply the following five-step model in order to determine this 

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 amount: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation, which for the Company is generally at a point in time. We also assess collectability based primarily on the customer’s payment history and on the creditworthiness of the customer.
 Product Revenues 
 Our product revenues consist of sales of JAKAFI, PEMAZYRE, ICLUSIG, and MINJUVI. Product revenues are recognized once we satisfy the performance obligation at a point in time under the revenue recognition criteria as described above. We recognize revenues for product received by our customers net of allowances for customer credits, including estimated rebates, chargebacks, discounts, returns, distribution service fees, patient assistance programs, and government rebates, such as Medicare Part D coverage gap reimbursements in the United States. These sales allowances and accruals are recorded based on estimates which are described in detail below. Estimates are assessed as of the end of each reporting period and are updated to reflect current information. We believe that our sales allowances and accruals are reasonable and appropriate based on current facts and circumstances.
 Customer Credits: Our customers are offered various forms of consideration, including allowances, service fees and prompt payment discounts. We expect our customers will earn prompt payment discounts and, therefore, we deduct the full amount of these discounts from total product sales when revenues are recognized. Service fees are also deducted from total product sales as they are earned.
 Rebates and Discounts: We accrue rebates for mandated discounts under the Medicaid Drug Rebate Program in the United States and mandated discounts in Europe in markets where government-sponsored healthcare systems are the primary payers for healthcare. These accruals are based on statutory discount rates and expected utilization as well as historical data we have accumulated since product launch. Our estimates for expected utilization of rebates are based on data received from our customers. Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters’ unpaid rebates. If actual future rebates vary from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment.
 Chargebacks: Chargebacks are discounts that occur when certain contracted customers purchase directly from our wholesalers at a discounted price. The wholesalers, in turn, charges back to us the difference between the price initially paid by the wholesalers and the discounted price paid by the contracted customers. In addition to actual chargebacks received, we maintain an accrual for chargebacks based on the estimated contractual discounts on the inventory levels on hand in our distribution channel. If actual future chargebacks vary from these estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment.
 Medicare Part D Coverage Gap: Medicare Part D prescription drug benefit mandates manufacturers to fund 70% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. Our estimates for the expected Medicare Part D coverage gap are based on historical invoices received and in part from data received from our customers. Funding of the coverage gap is generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters. If actual future funding varies from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. Additionally, beginning in January 2020, the amount of spending required by eligible patients in the Medicare Part D insurance coverage gap increased 30% due to the expiration of a provision in the Patient Protection and Affordable Care Act, which now results in a change in the True Out of Pocket (TrOOP) calculation methodology. The methodological change has resulted in an increase in required spending by patients and, in turn, an increase in manufacturers’ contributions on behalf of patients in the Medicare Part D insurance coverage gap.
 Co-payment Assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance. We accrue a liability for co-payment assistance based on actual program participation and estimates of program redemption using data provided by third-party administrators.

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 Product Royalty Revenues 
 Royalty revenues on commercial sales for JAKAVI and TABRECTA by Novartis are estimated based on information provided by Novartis. Royalty revenues on commercial sales for OLUMIANT by Lilly are estimated based on information provided by Lilly. We exercise judgment in determining whether the information provided is sufficiently reliable for us to base our royalty revenue recognition thereon. If actual royalties vary from estimates, we may need to adjust the prior period, which would affect royalty revenue and receivable in the period of adjustment.
 Milestone and Contract Revenues 
 At the inception of a contract, we determine the transaction price, in addition to any upfront payment, by estimating the amount of variable consideration, including milestone payments, at the outset of the contract utilizing the most likely amount method. Our contractual milestones typically relate to the achievement of pre-specified development, regulatory and commercialization events outside of our control, such as regulatory approval of a compound, first patient dosing or achievement of sales-based thresholds. We include milestones in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the milestone is subsequently resolved. Given the high level of uncertainty of achievement, variable consideration associated with milestones are fully constrained until confirmation of the satisfaction or completion of the milestone by the third-party. We review our estimate of the transaction price each period, and make revisions to such estimates as necessary.
 Stock Compensation. Share-based payment transactions with employees, which include stock options, restricted stock units (RSUs) and performance shares (PSUs), are recognized as compensation expense over the requisite service period based on their estimated fair values at the date of grant as well as expected forfeiture rates based on actual experience. The stock compensation process requires significant judgment and the use of estimates, particularly surrounding Black-Scholes assumptions such as stock price volatility over the option term and expected option lives, as well as expected forfeiture rates and the probability of PSUs vesting. The fair value of stock options, which are subject to graded vesting, are recognized as compensation expense over the requisite service period using the accelerated attribution method. The fair value of RSUs that are subject to cliff vesting are recognized as compensation expense over the requisite service period using the straight-line attribution method, and the fair value of RSUs that are subject to graded vesting are recognized as compensation expense over the requisite service period using the accelerated attribution method. The fair value of PSUs are recognized as compensation expense beginning at the time in which the performance conditions are deemed probable of achievement. We assess the probability of achievement of performance conditions, including projected product revenues and clinical development milestones, as of the end of each reporting period. Once a performance condition is considered probable, we record compensation expense based on the portion of the service period elapsed to date with respect to that award, with a cumulative catch-up, net of estimated forfeitures, and recognize any remaining compensation expense, if any, over the remaining requisite service period using the straight-line attribution method for PSUs that are subject to cliff vesting and using the accelerated attribution method for PSUs that are subject to graded vesting.
 Income Taxes. We account for income taxes using an asset and liability approach to financial accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect for years in which the basis differences are expected to reverse. We periodically assess the likelihood of the realization of deferred tax assets, and reduce the carrying amount of these deferred tax assets to an amount that is considered to be more-likely-than-not to be realizable. Our assessment considers recent cumulative earnings experience, projections of future taxable income (losses) and ongoing prudent and feasible tax planning strategies. When performing our assessment on projections of future taxable income (losses), we consider factors such as the likelihood of regulatory approval and commercial success of products currently under development, among other factors. Significant judgment is required in making this assessment and, to the extent that a reversal of any portion of our valuation allowance against our deferred tax assets is deemed appropriate, a tax benefit will be recognized against our income tax provision in the period of such reversal.
 We recognize the tax benefit from an uncertain tax position only if it is more-likely-than-not that the position will be sustained upon examination by the taxing authorities, including resolutions of any related appeals or litigation processes, 

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 based on the technical merits of the position. The tax benefit that is recorded for these positions is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. We adjust the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. Any interest and penalties on uncertain tax positions are included within the tax provision. 
 We record estimates and prepare and file tax returns in various jurisdictions across the United States, Canada, Europe, and Asia based upon our interpretation of local tax laws and regulations. While we exercise significant judgment when applying complex tax laws and regulations in these various taxing jurisdictions, many of our tax returns are open to audit, and may be subject to future tax, interest, and penalty assessments. 
 We believe our estimates for the valuation allowances against certain deferred tax assets and the amount of benefits associated with uncertain tax positions recognized in our financial statements are appropriate based upon our assessment of the factors mentioned above. 
 Acquisition-related contingent consideration. Acquisition-related contingent consideration, which consists of our future royalty obligations to ARIAD/Takeda, was recorded on the acquisition date at the estimated fair value of the obligation, in accordance with the acquisition method of accounting. The fair value of the contingent consideration was determined using an income approach based on estimated ICLUSIG revenues in the European Union and other countries. As the fair value measurement is based on significant inputs that are unobservable in the market, this represents a Level 3 measurement.
 The fair value of the acquisition-related contingent consideration is remeasured each reporting period, with changes in fair value recorded in the consolidated statements of operations. The assumptions used to determine the fair value of the acquisition-related contingent consideration include projected ICLUSIG revenues and a discount rate which, require significant judgement and are analyzed on a quarterly basis. While we use the best available information to prepare our projected ICLUSIG revenues and discount rate assumptions, actual ICLUSIG revenues and/or market conditions could differ significantly. Changes to one or multiple inputs could have a material impact on the amount of acquisition-related contingent consideration expense recorded during the reporting period. 
 Results of Operations 
 We recorded net income of $181.7 million and basic and diluted net income per share of $0.82 for the three months ended September 30, 2021, as compared to net loss of $15.2 million and basic and diluted net loss per share of $0.07 in the corresponding period in 2020. We recorded net income of $384.7 million and basic net income per share of $1.75 and diluted net income per share of $1.73 for the nine months ended September 30, 2021, as compared to net loss of $445.5 million and basic and diluted net loss per share of $2.05 in the corresponding period in 2020. 

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 Revenues. 
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 ​ 
 For the Three Months Ended, 
 
 For the Nine Months Ended, 
 
 
 ​ 
 ​ 
 September 30, 
 
 September 30, 
 
 
 ​ 
 
 2021 
 
 2020 
 
 2021 
 
 2020 
 
 
 
 ​ 
 ​ 
 (in millions) 
 
 (in millions) 
 
 
 JAKAFI revenues, net
 ​ 
 $
 547.4 
 ​ 
 $
 487.8 
 ​ 
 $
 1,542.1 
 ​ 
 $
 1,421.0 
 ​ 
 
 ICLUSIG revenues, net
 ​ 
 ​ 
 28.5 
 ​ 
 ​ 
 26.4 
 ​ 
 ​ 
 82.4 
 ​ 
 ​ 
 76.4 
 ​ 
 
 PEMAZYRE revenues, net
 ​ 
 ​ 
 17.6 
 ​ 
 ​ 
 8.1 
 ​ 
 ​ 
 48.9 
 ​ 
 ​ 
 11.9 
 ​ 
 
 MINJUVI revenues, net
 ​ 
 ​ 
 0.5 
 ​ 
 ​ 
 — 
 ​ 
 ​ 
 0.5 
 ​ 
 ​ 
 — 
 ​ 
 
 Total product revenues, net
 ​ 
 ​ 
 594.0 
 ​ 
 ​ 
 522.3 
 ​ 
 ​ 
 1,673.9 
 ​ 
 ​ 
 1,509.3 
 ​ 
 
 JAKAVI product royalty revenues
 ​ 
 ​ 
 94.7 
 ​ 
 ​ 
 68.3 
 ​ 
 ​ 
 242.3 
 ​ 
 ​ 
 190.9 
 ​ 
 
 OLUMIANT product royalty revenues
 ​ 
 ​ 
 86.6 
 ​ 
 ​ 
 28.6 
 ​ 
 ​ 
 154.9 
 ​ 
 ​ 
 79.9 
 ​ 
 
 TABRECTA product royalty revenues
 ​ 
 ​ 
 2.7 
 ​ 
 ​ 
 1.4 
 ​ 
 ​ 
 7.3 
 ​ 
 ​ 
 2.1 
 ​ 
 
 Total product royalty revenues
 ​ 
 
 184.0 
 ​ 
 
 98.3 
 ​ 
 
 404.5 
 ​ 
 
 272.9 
 ​ 
 
 Milestone and contract revenues
 ​ 
 
 35.0 
 ​ 
 
 — 
 ​ 
 
 45.0 
 ​ 
 
 95.0 
 ​ 
 
 Total revenues
 ​ 
 $
 813.0 
 ​ 
 $
 620.6 
 ​ 
 $
 2,123.4 
 ​ 
 $
 1,877.2 
 ​ 
 

 ​ 
 The increase in JAKAFI product revenues for the three months ended September 30, 2021 as compared to the corresponding period in 2020 was comprised of a volume increase of $41.4 million and a price increase of $18.2 million. The increase in JAKAFI product revenues for the nine months ended September 30, 2021 as compared to the corresponding period in 2020 was comprised of a volume increase of $66.4 million and a price increase of $54.7 million. Additionally, our product revenues may fluctuate from quarter to quarter due to our customers’ purchasing patterns over the course of the year, including as a result of increased inventory building by customers in advance of expected or announced price increases. Product revenues are recorded net of estimated product returns, pricing discounts including rebates offered pursuant to mandatory federal and state government programs and chargebacks, prompt pay discounts and distribution fees and co-pay assistance. Our revenue recognition policies require estimates of the aforementioned sales allowances each period. 
 The following table provides a summary of activity with respect to our sales allowances and accruals (in thousands):
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 
 ​ 
 ​ 
 
 ​ 
 ​ 
 
 Co-Pay 
 
 ​ 
 ​ 
 
 ​ 
 ​ 
 
 
 ​ 
 ​ 
 Discounts and 
 ​ 
 Government 
 ​ 
 Assistance 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 
 ​ 
 ​ 
 Distribution 
 ​ 
 Rebates and 
 ​ 
 and Other 
 ​ 
 Product 
 ​ 
 ​ 
 ​ 
 
 
 Nine Months Ended September 30, 2021 
 
 Fees 
 ​ 
 Chargebacks 
 ​ 
 Discounts 
 ​ 
 Returns 
 
 Total 
 
 
 Balance at January 1, 2021
 ​ 
 $
 8,536 
 ​ 
 $
 66,991 
 ​ 
 $
 1,284 
 ​ 
 $
 1,568 
 ​ 
 $
 78,379 
 ​ 
 
 Allowances for current period sales
 ​ 
 
 49,750 
 ​ 
 ​ 
 324,082 
 ​ 
 ​ 
 18,824 
 ​ 
 ​ 
 2,656 
 ​ 
 
 395,312 
 ​ 
 
 Allowances for prior period sales
 ​ 
 
 91 
 ​ 
 ​ 
 (1,207) 
 ​ 
 ​ 
 — 
 ​ 
 ​ 
 — 
 ​ 
 
 (1,116) 
 ​ 
 
 Credits/payments for current period sales
 ​ 
 
 (43,144) 
 ​ 
 ​ 
 (257,461) 
 ​ 
 ​ 
 (17,731) 
 ​ 
 ​ 
 — 
 ​ 
 
 (318,336) 
 ​ 
 
 Credits/payments for prior period sales
 ​ 
 
 (6,387) 
 ​ 
 ​ 
 (35,173) 
 ​ 
 ​ 
 (407) 
 ​ 
 ​ 
 (1,404) 
 ​ 
 
 (43,371) 
 ​ 
 
 Balance at September 30, 2021
 ​ 
 $
 8,846 
 ​ 
 $
 97,232 
 ​ 
 $
 1,970 
 ​ 
 $
 2,820 
 ​ 
 $
 110,868 
 ​ 
 

 Government rebates and chargebacks are the most significant component of our sales allowances. Increases in certain government reimbursement rates are limited to a measure of inflation, and when the price of a drug increases faster than this measure of inflation it will result in a penalty adjustment factor that causes a larger sales allowance to those government related entities. We expect government rebates and chargebacks as a percentage of our gross product sales will continue to increase in connection with any future product price increases greater than the rate of inflation, and any such increase in these government rebates and chargebacks will have a negative impact on our reported product revenues, net. We adjust our estimates for government rebates and chargebacks based on new information regarding actual rebates as it becomes available. Claims by third-party payors for rebates and chargebacks are frequently submitted after the period in which the related sales occurred, which may result in adjustments to prior period accrual balances in the period in which the new information becomes available. We also adjust our allowance for product returns based on new information regarding actual returns as it becomes available. 

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 We expect our sales allowances to fluctuate from quarter to quarter as a result of the Medicare Part D Coverage Gap, the volume of purchases eligible for government mandated discounts and rebates as well as changes in discount percentages which are impacted by potential future price increases, rate of inflation, and other factors.
 Product royalty revenues on commercial sales of JAKAVI and TABRECTA by Novartis are based on net sales of licensed products in licensed territories as provided by Novartis. Product royalty revenues on commercial sales of OLUMIANT by Lilly are based on net sales of licensed products in licensed territories as provided by Lilly. 
 Our milestone and contract revenues for the nine months ended September 30, 2021, were derived from a $10.0 million milestone under the Innovent research and collaboration and licensing agreement and a $35.0 million upfront payment under the InnoCare collaboration and license agreement. Our milestone and contract revenues for the nine months ended September 30, 2020, were derived from a $5.0 million milestone under the Innovent research collaboration and licensing agreement and $90.0 million in milestones under the Novartis collaboration and license agreement. 
 Cost of Product Revenues. 
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 ​ 
 For the Three Months Ended, 
 
 For the Nine Months Ended, 
 
 
 ​ 
 ​ 
 September 30, 
 
 September 30, 
 
 
 ​ 
 
 2021 
 
 2020 
 
 2021 
 
 2020 
 
 
 
 ​ 
 ​ 
 (in millions) 
 
 (in millions) 
 
 
 Product costs
 ​ 
 $
 4.8 
 ​ 
 $
 3.9 
 ​ 
 $
 14.3 
 ​ 
 $
 10.8 
 ​ 
 
 Salary and benefits related
 ​ 
 ​ 
 2.3 
 ​ 
 ​ 
 0.9 
 ​ 
 ​ 
 4.9 
 ​ 
 ​ 
 2.7 
 ​ 
 
 Stock compensation 
 ​ 
 ​ 
 0.5 
 ​ 
 ​ 
 0.2 
 ​ 
 ​ 
 1.1 
 ​ 
 ​ 
 0.7 
 ​ 
 
 Royalty expense
 ​ 
 
 26.9 
 ​ 
 
 23.9 
 ​ 
 
 70.6 
 ​ 
 
 64.6 
 ​ 
 
 Amortization of definite-lived intangible assets
 ​ 
 
 5.4 
 ​ 
 
 5.4 
 ​ 
 
 16.2 
 ​ 
 
 16.2 
 ​ 
 
 Total cost of product revenues
 ​ 
 $
 39.9 
 ​ 
 $
 34.3 
 ​ 
 $
 107.1 
 ​ 
 $
 95.0 
 ​ 
 

 Cost of product revenues includes all product related costs, employee personnel costs, including stock compensation, for those employees dedicated to the production of our commercial products, low single-digit royalties to Novartis on all sales of JAKAFI in the United States and amortization of our licensed intellectual property rights for ICLUSIG using the straight-line method over the estimated useful life of 12.5 years. 
 Operating Expenses. 
 Research and development expenses 
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 ​ 
 For the Three Months Ended, 
 ​ 
 For the Nine Months Ended, 
 ​ 
 
 ​ 
 ​ 
 September 30, 
 ​ 
 September 30, 
 ​ 
 
 ​ 
 
 2021 
 
 2020 
 
 2021 
 
 2020 
 
 
 
 ​ 
 ​ 
 (in millions) 
 ​ 
 (in millions) 
 ​ 
 
 Salary and benefits related
 
 $
 75.9
 
 $
 73.2 
 
 $
 229.3
 
 $
 206.2 
 
 
 Stock compensation
 ​ 
 
 26.3
 ​ 
 
 29.0 
 ​ 
 
 84.2
 ​ 
 
 90.2 
 ​ 
 
 Clinical research and outside services
 ​ 
 
 196.6
 ​ 
 
 308.8 
 ​ 
 
 576.2
 ​ 
 
 1,437.9 
 ​ 
 
 Occupancy and all other costs
 ​ 
 
 36.1
 ​ 
 
 27.1 
 ​ 
 
 95.7
 ​ 
 
 75.7 
 ​ 
 
 Total research and development expenses
 ​ 
 $
 334.9
 ​ 
 $
 438.1 
 ​ 
 $
 985.4 
 ​ 
 $
 1,810.0 
 ​ 
 

 We account for research and development costs by natural expense line and not costs by project. The increase in salary and benefits related expense for the three and nine months ended September 30, 2021 as compared to the corresponding periods in 2020 was due primarily to increased development headcount to sustain our development pipeline. Stock compensation expense may fluctuate from period to period based on the number of awards granted, stock price volatility and expected award lives, as well as expected award forfeiture rates which are used to value equity-based compensation. 
 The decrease in clinical research and outside services expense for the three months ended September 30, 2021 as compared to the corresponding period in 2020 was primarily due to expense related to the purchase of an FDA priority 

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 review voucher in the prior year that enabled OPZELURA to be the first JAK inhibitor approved in a topical formulation, and the decrease in such expense for the nine months ended September 30, 2021 as compared to the corresponding period in 2020 was also due to upfront consideration related to our collaborative agreements recorded in the 2020 period. Research and development expenses include upfront and milestone expenses related to our collaborative agreements of $4.3 million and $20.8 million, respectively, for the three and nine months ended September 30, 2021. Research and development expenses include upfront and milestone expenses related to our collaborative agreements and the cost of purchasing a priority review voucher of $141.5 million and $950.5 million, respectively, for the three and nine months ended September 30, 2020. Research and development expenses for the three and nine months ended September 30, 2021 and 2020 were net of $3.2 million, $15.7 million, $2.1 million and $7.0 million, respectively, of costs reimbursed by our collaborative partners. 
 In addition to one-time expenses resulting from upfront fees in connection with the entry into any new or amended collaboration agreements and payment of milestones under those agreements, research and development expenses may fluctuate from period to period depending upon the stage of certain projects and the level of pre-clinical and clinical trial related activities. Many factors can affect the cost and timing of our clinical trials, including requests by regulatory agencies for more information, inconclusive results requiring additional clinical trials, slow patient enrollment, adverse side effects among patients, insufficient supplies for our clinical trials, timing of drug supply, including API, and real or perceived lack of effectiveness or safety of our investigational drugs in our clinical trials. In addition, the development of all of our products will be subject to extensive governmental regulation. These factors make it difficult for us to predict the timing and costs of the further development and approval of our products.
 Selling, general and administrative expenses 
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 ​ 
 For the Three Months Ended, 
 ​ 
 For the Nine Months Ended, 
 ​ 
 
 ​ 
 ​ 
 September 30, 
 ​ 
 September 30, 
 ​ 
 
 ​ 
 
 2021 
 
 2020 
 
 2021 
 
 2020 
 
 
 
 ​ 
 ​ 
 (in millions) 
 ​ 
 (in millions) 
 ​ 
 
 Salary and benefits related
 
 $
 58.3
 
 $
 42.1
 
 $
 163.4
 
 $
 113.1
 
 
 Stock compensation
 ​ 
 
 15.9
 ​ 
 
 14.6
 ​ 
 
 49.5
 ​ 
 
 41.7
 ​ 
 
 Other contract services and outside costs
 ​ 
 ​ 
 116.5
 ​ 
 ​ 
 64.1
 ​ 
 ​ 
 300.5
 ​ 
 ​ 
 195.1
 ​ 
 
 Total selling, general and administrative expenses
 ​ 
 $
 190.7 
 ​ 
 $
 120.8 
 ​ 
 $
 513.4 
 ​ 
 $
 349.9 
 ​ 
 

 The increase in salary and benefits related expense for the three and nine months ended September 30, 2021 as compared to the corresponding period in 2020 was due primarily to increased headcount. This increased headcount was due primarily to the ongoing commercialization efforts related to JAKAFI for intermediate or high-risk myelofibrosis, uncontrolled polycythemia vera and GVHD as well as increased headcount related to the establishment of our dermatology commercial organization. Stock compensation expense may fluctuate from period to period based on the number of awards granted, stock price volatility and expected award lives, as well as expected award forfeiture rates which are used to value equity-based compensation. The increase in other contract services and outside costs for the three and nine months ended September 30, 2021, as compared to the corresponding period in 2020, was due primarily to expenses related to the establishment of our dermatology commercial organization and expenses related to activities to support the potential launch of ruxolitinib cream for the treatment of atopic dermatitis. The nine months ended September 30, 2021 also included expense recognized in connection with a legal settlement, as discussed in Note 15 of notes to our condensed consolidated financial statements.
 Change in fair value of acquisition-related contingent consideration 
 Acquisition-related contingent consideration, which consists of our future royalty obligations to Takeda, was recorded on the acquisition date, June 1, 2016, at the estimated fair value of the obligation, in accordance with the acquisition method of accounting. The fair value of the acquisition-related contingent consideration is remeasured quarterly. The change in fair value of the acquisition-related contingent consideration for the three and nine months ended September 30, 2021 was $2.9 million and $13.1 million, respectively, which is recorded in change in fair value of acquisition-related contingent consideration on the condensed consolidated statements of operations. The change in fair value of the acquisition-related contingent consideration for the three and nine months ended September 30, 2020 was $7.1 million and $19.8 million, respectively, which is recorded in change in fair value of acquisition-related contingent 

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 consideration on the condensed consolidated statements of operations. The change in fair value for the three and nine months ended September 30, 2021 and 2020 was due primarily to the impact of updated projections of future ICLUSIG revenues in the European Union. 
 Collaboration loss sharing 
 Under the collaboration and license agreement with MorphoSys, which was executed in March 2020, we and MorphoSys are both responsible for the commercialization efforts of tafasitamab in the United States and will share equally the profits and losses from the co-commercialization efforts. For the three and nine months ended September 30, 2021, our 50% share of the losses for tafasitamab was $9.1 million and $29.5 million, respectively, as recorded in collaboration loss sharing on the condensed consolidated statement of operations. For the three and nine months ended September 30, 2020, our 50% share of the losses for tafasitamab was $15.0 million and $30.4 million, respectively, as recorded in collaboration loss sharing on the condensed consolidated statement of operations. 
 Other income (expense). 
 Other income (expense), net. Other income (expense), net for the three and nine months ended September 30, 2021 was $1.9 million and $4.9 million, respectively. Other income (expense), net for the three and nine months ended September 30, 2020 was $4.9 million and $18.4 million, respectively. The decrease in other income (expense), net for the nine months ended September 30, 2021 primarily relates to a decrease in interest income.
 Interest expense. Interest expense for the three and nine months ended September 30, 2021 was $0.4 million and $1.2 million, respectively. Interest expense for the three and nine months ended September 30, 2020 was $0.5 million and $1.7 million, respectively. Included in interest expense for the three and nine months ended September 30, 2021 was approximately $0.4 million and $1.0 million, respectively, of interest expense on our finance lease liabilities. Included in interest expense for the three and nine months ended September 30, 2020 was $0.2 million and $0.6 million, respectively, of non-cash charges to amortize the discount on our convertible senior notes due November 2020 and approximately $0.3 million and $0.9 million, respectively, of interest expense on our finance lease liabilities. 
 Unrealized gain (loss) on long term investments. Unrealized gains and losses on long term investments will fluctuate from period to period, based on the change in fair value of the securities we hold in our publicly held collaboration partners. The following table provides a summary of those unrealized gains and (losses): 
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 ​ 
 For the Three Months Ended, 
 ​ 
 For the Nine Months Ended, 
 ​ 
 
 ​ 
 ​ 
 September 30, 
 ​ 
 September 30, 
 ​ 
 
 ​ 
 
 2021 
 
 2020 
 
 2021 
 
 2020 
 
 
 
 ​ 
 ​ 
 (in millions) 
 ​ 
 (in millions) 
 ​ 
 
 Agenus
 
 $
 (2.8) 
 
 $
 3.9 
 
 $
 29.1 
 
 $
 1.2 
 
 
 Calithera
 ​ 
 
 0.2 
 ​ 
 ​ 
 (3.2) 
 ​ 
 ​ 
 (4.6) 
 ​ 
 ​ 
 (3.9) 
 ​ 
 
 Merus
 ​ 
 ​ 
 3.3 
 ​ 
 ​ 
 (13.1) 
 ​ 
 ​ 
 13.3 
 ​ 
 ​ 
 (6.7) 
 ​ 
 
 MorphoSys
 ​ 
 ​ 
 (27.3) 
 ​ 
 ​ 
 0.9 
 ​ 
 ​ 
 (60.2) 
 ​ 
 ​ 
 18.5 
 ​ 
 
 Syros
 ​ 
 ​ 
 (0.9) 
 ​ 
 ​ 
 (1.7) 
 ​ 
 ​ 
 (6.0) 
 ​ 
 ​ 
 1.8 
 ​ 
 
 Total unrealized gain (loss) on long term investments
 ​ 
 $
 (27.5) 
 ​ 
 $
 (13.2) 
 ​ 
 $
 (28.4) 
 ​ 
 $
 10.9 
 ​ 
 

 Provision for income taxes. The provision for income taxes for the three and nine months ended September 30, 2021 was $27.7 million and $65.7 million, respectively. The provision for income taxes for the three and nine months ended September 30, 2020 and was $11.7 million and $45.2 million, respectively. The tax expense for the three and nine months ended September 30, 2021 and 2020 represents primarily federal and state tax liabilities that are not fully sheltered by net operating losses or research and development tax credit carryforwards.
 Liquidity and Capital Resources 
 Due to historical net losses, we had an accumulated deficit of $1.3 billion as of September 30, 2021. We have funded our research and development operations through cash received from customers, sales of equity securities, the 

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 issuance of convertible notes, and collaborative arrangements. At September 30, 2021, we had available cash, cash equivalents and marketable securities of $2.3 billion. Our cash and marketable securities balances are held in a variety of interest-bearing instruments, including money market accounts, and U.S. government debt securities. Available cash is invested in accordance with our investment policy’s primary objectives of liquidity, safety of principal and diversity of investments.
 Net cash provided by operating activities for the nine months ended September 30, 2021 was $634.1 million and net cash used in operating activities for the nine months ended September 30, 2020 was $231.9 million. The increase in cash provided by operating activities was due primarily to cash outflows in March 2020 related to our collaboration and license agreement with MorphoSys and changes in working capital.
 Our investing activities, other than purchases, sales and maturities of marketable securities, have consisted predominantly of capital expenditures and purchases of long term investments. Net cash used by investing activities was $141.7 million for the nine months ended September 30, 2021, which represented purchases of marketable securities of $228.2 million, capital expenditures of $146.5 million and purchases of long term equity investments of $8.7 million, offset in part by the sale of long term investment of $10.5 million and the sale and maturities of marketable securities of $231.3 million. Net cash used in investing activities was $166.3 million for the nine months ended September 30, 2020, which represented purchases of marketable securities of $418.7 million, capital expenditures of $135.9 million, and purchases of long term equity investments of $95.5 million, offset in part by the sale of long term investment of $17.3 million and the sales and maturities of marketable securities of $466.6 million. In the future, net cash used by investing activities may fluctuate significantly from period to period due to the timing of strategic equity investments, acquisitions, and capital expenditures and maturities/sales and purchases of marketable securities.
 Net cash used in financing activities was $2.8 million for the nine months ended September 30, 2021 and net cash provided by financing activities was $59.8 million for the nine months ended September 30, 2020, primarily representing proceeds from the issuance of common stock under our stock plans net of tax withholding, offset by cash paid to ARIAD/Takeda for contingent consideration. 
 Our capital expenditures for construction activities and our non-operating contractual operating and finance lease obligations are discussed in Note 7 of notes to our condensed consolidated financial statements. In addition, in October 2019, we entered into an agreement with Wilmington Friends School Inc., to purchase property for $50.0 million to expand our global headquarters. Under that agreement, closing of the purchase is subject to certain standard closing conditions, including an initial diligence period and a subsequent approval period. 
 In August 2021, we entered into a $500.0 million, three-year senior unsecured revolving credit facility. We may increase the maximum revolving commitments or add one or more incremental term loan facilities, subject to obtaining commitments from any participating lenders and certain other conditions, in an amount not to exceed $250.0 million plus a contingent additional amount that is dependent on our pro forma consolidated leverage ratio. As of September 30, 2021, we had no outstanding borrowings and were in compliance with all covenants under this facility. We believe that our cash flow from operations, together with our cash, cash equivalents and marketable securities and funds available under our revolving credit facility, will be adequate to satisfy our capital needs for the foreseeable future. Our cash requirements depend on numerous factors, including our expenditures in connection with our drug discovery and development programs and commercialization operations; expenditures in connection with litigation or other legal proceedings; costs for future facility requirements; and expenditures for future strategic equity investments or potential acquisitions. We have entered into and may in the future seek to license additional rights relating to technologies or drug development candidates in connection with our drug discovery and development programs. Under these licenses, we may be required to pay upfront fees, milestone payments, and royalties on sales of future products. These contingent future payments are discussed in detail in Note 9 of notes to our condensed consolidated financial statements.
 To the extent we seek to augment our existing cash resources and cash flow from operations to satisfy our cash requirements for future acquisitions or other strategic purposes, we expect that additional funding can be obtained through equity or debt financings or from other sources. The sale of equity or convertible debt securities in the future may be dilutive to our stockholders, and may provide for rights, preferences or privileges senior to those of our holders of common 

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 stock. Debt financing arrangements may require us to pledge certain assets or enter into covenants that could restrict our operations or our ability to incur further indebtedness.
 Off Balance Sheet Arrangements 
 We have no off-balance sheet arrangements other than those that are discussed above.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
INCYTE CORP 10-Q

Item 2. Management’s Discussion and Analysis
